Credit Karma Guide to Business Credit Scores (2024)

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If you’re a business owner, establishing business credit can help protect your personal credit, secure competitive loans, get better insurance rates and more. Though business credit scores are similar to personal credit scores, there are some key differences. This guide will lead you through it all.

Healthy business credit is one of the most essential ingredients to building a successful business.

Building business credit can help protect your personal credit, limit personal liability, increase credit capacity, help you secure more-favorable terms on loans, help you qualify for lower insurance premiums, and impress anyone evaluating your business — whether they’re investors, partners, vendors or clients.

Our guide will teach you everything you need to know about establishing and building a good business credit score so that you can take your company to the next level.

If you’re familiar with personal credit scores, then you’ll recognize business credit scores as a similar concept.

As a quick refresh, your personal credit score is a three-digit number that helps lenders decide whether to offer you credit, and on what terms.

The way they see it, the higher your credit scores are, the higher your likelihood to pay off debt on time. This comes into play when applying for credit cards or loans, and is determined using information from your personal credit reports.

A business credit score performs the same function for your business as a personal score does for your own finances. Lenders and creditors look to minimize risk when giving out loans, so they look for information on whether a business is likely to repay the loan.

Business credit reporting agencies collect information on your business’s financial history and can use it to put together an assessment of your risk level for lenders — this serves as your business credit score.

The higher your score, the likelier you appear to lenders to be able to repay your debts. And that means it might be easier for you to get approved for loans and qualify for lower insurance premiums.

The difference between your personal credit scores and your business credit scores

There are a few key differences between personal and business credit scores you should know.

• Whereas your personal credit is scored on a 300-to-850 scale, business credit scores are often scored on a 1-to-100 scale.
• Since businesses don’t have Social Security numbers, they’re instead tracked by their name, address and employer identification number, also known as an EIN.
• Unlike personal credit scores, business credit scores are publicly available. Anyone can go to one of the reporting agencies and look up your business’s score — though they may have to pay to do so.
• Several business credit reporting agencies track business credit scores. Three of the major ones are Dun & Bradstreet, Equifax Business and Experian Business. You may have to apply to these bureaus in order to actually be tracked. For instance, Dun & Bradstreet uses what it calls a D-U-N-S^® Number to track each physical location of the businesses — you have to apply for one in order to show up in its system. Having a nine-digit D-U-N-S^® Number allows other companies or the government to make an informed decision on whether to lend to or work with you.

Is a business credit score necessary?

Whether you’re starting up or already running a business, you might have so much on your plate that establishing business credit may be low on your list of priorities — and we can’t blame you. We know you’re swamped.

“For many entrepreneurs, business credit isn’t even on their radar until something happens, such as getting denied for insurance or small-business loans,” says Gerri Detweiler, education director at Nav, a company that helps business owners track and manage their business credit.

“They aren’t checking their business credit reports, so they don’t know if they are accurate, and they aren’t monitoring them for negative events or identity theft,” she explains.

But establishing business credit early on comes with a number of advantages.

• Good credit scores can enable you to take out business loans at lower rates, or qualify for lower insurance premiums.
• Establishing business credit can also enable you to take out business loans without signing a personal guarantee to be liable for any debts your business is unable to repay.
• Good business credit also makes your business look good. Creditors are not the only ones who might be interested in your business credit scores. Investors, insurance companies and potential business partners may also request to see your reports.

Building good business credit is similar to building personal credit. But, as we’ve mentioned, there are a few key differences.

“[A] common mistake is assuming that as long as you pay your bills on time, your business credit is fine,” Detweiler says. “That may be true, but not always. Many lenders and vendors don’t report to commercial [reporting] agencies, which means you may not have a business credit [score], even after years in business.”

This could lead to a history of on-time payments that goes unreflected.

Here are some important steps you can take to ensure you’re actually building business credit.

5 steps to building business credit

1. Make sure your business is legally registered

Incorporate or form an LLC, and get a federal employer identification number. Some business credit reporting agencies will use this to track your business instead of the Social Security number they use to track personal credit.

2. Get a business credit card and a business bank account

Keep your business card strictly for business and your personal credit card for personal expenses to make your taxes easier down the line. Otherwise, follow all the good credit card habits you would use to build good personal credit — such as keeping your credit utilization low and making consistent, on-time payments.

3. Work with vendors that report payments to the business credit bureaus

If you’re not sure whether one of your vendors reports payments to the credit bureaus, feel free to ask. It’s OK to prioritize working with vendors who report payments.

4.Pay on time — or, better yet, early

Late payments are one of the worst things you could do for your business credit scores, but paying early is even better than on time. The Dun & Bradstreet PAYDEX^® score, a commonly used score, will only award you its highest score if you pay vendors early.

5. Check on your scores regularly

Dun & Bradstreet, Equifax Business and Experian Business are the major agencies tracking business credit scores, but checking their reports will cost you. It’s worth keeping track of your business credit scores though, especially if you’re thinking about applying for a business loan in the near future.

Does personal credit still matter for business?

Certain business credit scores will take both business and personal credit reports into account.

“Your personal and business credit reports are kept in separate databases. They do not impact each other,” Detweiler says. “However, there are a few business credit cards and financing options that may report to both commercial and personal credit. And there are some credit scores, such as the FICO^® SBSS℠, that include data from both personal and business credit.”

“Experian also has a credit score that can take both into account. So it’s important for business owners to understand, monitor and build both,” she says.

Since business credit scores vary by bureau, it makes sense to check in on your credit scores with all three bureaus from time to time. Here’s how.

Dun & Bradstreet

Dun & Bradstreet uses a PAYDEX^® score, which measures a business’s payment history on a 1-to-100 scale. A score of 1–49 indicates a high risk of late payment, 50–79 indicates moderate risk, and 80–100 represents low risk.

To view your credit file, you’ll need the CreditBuilder™ Plus product. Signing up for CreditBuilder™ Plus comes with a D-U-N-S^® Number, which is how Dun & Bradstreet will track your credit history.

Along with your full credit file and score, you’ll also be able to add positive payment experiences to your file and dispute inaccurate information that appears on your report.

Once you’ve reviewed your credit file, you could potentially downgrade to its free CreditSignal^® product, which allows you to monitor changes to your D&B scores and ratings, and lets you know when your business credit file has been purchased (possibly by a potential lender or business partner). Note that this product doesn’t actually give you access to your credit file.

Equifax

To order an Equifax business credit report, head to its website and search for your business.

This report — the same that could be ordered by your creditors, partners or competitors — shows your Equifax Business Credit Risk Score™ and your Equifax Business Failure Score™, which measure your likelihood of repaying loans on time and the likelihood of your business failing, respectively.

Experian

To get your Experian business credit score, go to its website, where you can purchase a CreditScore℠ Report, which will include your Experian business credit score.

For additional information like payment history and inquiry details, you can get a ProfilePlus℠ Report. It also offers a subscription service that allows ongoing access to the information.

Similar to the other scores, the Experian business credit score is on a 1–100 scale designed to predict derogatory payment behavior. The algorithm is based on credit history, utilization, balances, trends, public records and demographic information.

A score of 1–10 means you are considered a high risk to lenders, a score of 11–25 means you’re medium to high, a score of 26–50 means you’re medium, a score of 51–75 means you’re low to medium, and a score of 76–100 means you’re a low risk to lenders.

How to dispute errors on your business credit reports

As with your personal credit scores, it’s important to check your business credit scores regularly, as the credit bureaus can make mistakes or have incorrect information on your reports.

“Your business could get mixed up with that of another, which could mean negative information from another business is mixed with yours,” Detweiler says. “Or information such as UCC filings could be affecting your business credit and you don’t know it.”

Contacting the credit bureaus directly is the best way to resolve this type of discrepancy. If you’re able to prove that their information is incorrect, they will adjust the reports accordingly.

We know your company is enormously important to you. So you should know your business credit scores are one of the most important data points that potential creditors, investors and partners will look at to evaluate your business.

As such, it pays to stay on top of it. Register your business legally and apply for a federal employer identification number and a D-U-N-S®Number. Get a business credit card and bank account, and make all your business purchases with them. Work with vendors who report to the business credit reporting agencies, and pay them early.

Once you have these good habits in place, check back on your scores regularly to make sure your credit reports are up to date and accurate.