Stay on Top of Your Business Credit Rating

CPAs & Advisors

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These days, anyone looking to form a new business relationship — especially one that involves credit — is wise to check out the risk involved first. After all, we know that even giant companies that once seemed untouchable, may be teetering on too narrow a pedestal.

With that in mind, various parties might be checking out your company’s credit rating to determine whether they want to do business with you. That’s why, just as with your personal credit report, you need to be on top of what is in your business credit file.

If your company is in good standing, is free of legal hassles and has a good reputation, your credit file has the power to work for you. A good business credit score can:

  • Lead to lower financing costs on loans and credit cards.
  • Enable you to qualify for better credit terms from suppliers.
  • Lower your insurance premiums.

Of course, this pendulum swings both ways. Negative information, even if it’s false, can leave your company with higher interest rates, lower credit limits and elevated insurance premiums, plus a loss of revenue if customers decide not to take a chance doing business with you.

What Factors Are Included?

Information in a business credit report is gleaned from a wide variety of public and private sources, including:

  • The Yellow Pages and other print directories;
  • Contracts and loans connected to the federal government; people and companies you’ve done business with;
  • Corporate financial reports;
  • Legal filings;
  • Mining from Internet sites; and
  • The news media.

Does Every Business Have a Credit Score?

No. Many small businesses are judged by the personal credit score of the owner. That often happens when a sole proprietor pays business bills out of a personal checking account. Since business credit reporting agencies do gather information from sources like the Yellow Pages, there might be a bare bones record. And, if there are any recent legal judgments or pending lawsuits, these may show up and raise red flags for anyone who inquires about your business.

© 2016 Provided by Thomson Reuters


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