June 2019

Building Your Business Credit Score for Greater Success

3 minute read

Does your small business want better terms from your credit card issuer and bank? Follow these tips to build and maintain a solid business credit score.

Like most consumers, you probably watch your credit score carefully—after all, it can be your golden ticket to secure a credit card with better perks or obtain a home or automobile loan with exceptional interest rates. Likewise, organizations should pay close attention to business credit scores as a solid credit record can make a huge difference in your company's ability to get the financing you need to grow.

In fact, a recent report found that many small businesses have trouble accessing credit due to a low business credit score, and instead turn to their own personal finances, which come with high risks.1 Here is a primer on what a business credit score is and how to create and maintain yours.

Personal and business credit scores—Some important differences

Your personal credit score is a number between about 300 and 900—the higher, the better—with a score of about 650 as the magic number where you are considered to have “good credit." You can find out more about your personal credit score by checking with the two credit bureaus that track it, TransUnion and Equifax.

A business credit score is a little different. There are four nationwide credit reporting bureaus in Canada—Equifax, Experian, TransUnion, and Dun & Bradstreet—and each scores your business between 0 and 100. Different formulas are used to determine this business credit score, which means yours can differ between agencies.

Unlike a consumer credit score, anyone can pull your business credit record. Take this into consideration and constantly aim to keep yours high —any potential supplier or lender could be pulling your business report—or all four.

Build your business credit

Consider these four steps for building a solid business credit score that conveys the health of your company:

1. Establish your business as a separate business entity. It's best to form either a corporation or a Limited Liability Corporation (LLC), rather than operate as a sole proprietor. First you'll have to do a NUANS name search, which will develop a report to determine whether the name you are proposing is available; and then you can obtain your nine-digit business number from the Canada Revenue Agency, which establishes your legitimacy (and is required to pay taxes).

2. Separate your business and personal finances. Small business owners should always separate personal and business credit cards and bank accounts to simplify accounting—and also so that a problem with one side doesn't inadvertently wreak havoc on the other. Even with separate accounts, you should always aim to keep your personal credit pristine as creditors may choose to pull your personal credit report as well, or details could be co-mingled.

3. Practice good credit habits. Many of the same ways that you build consumer credit—such as always paying your bills on time and maintaining a good utilization ratio—work for creating and maintaining business credit too. By building solid credit, you can often reap additional financial services that are integral to a growing business. For example, American Express business clients can leverage up to 55 days of unsecured credit*.

It's also important to work with a credit supplier that offers a wide variety of payment options and services that you can customize to your own business. American Express clients can centralize travel costs through a Business Travel Account and improve efficiency and working capital through the online payment platform, Buyer Initiated Payments, all while establishing a business credit history and a credit relationship with one of the biggest providers of unsecured lending.

4. Check your credit frequently. Finally, just as you should do with your personal credit, check your business credit regularly to ensure it is accurate so you can report any problems immediately and also identify areas for potential improvement. After all, your business credit score should reflect your own personal business ethics and standards. Want to know how your business credit score can pay off in the form of expanded lines of credit and creative supplier payment options? Find out how American Express can help your business thrive.

* As a charge card, the balance must always be paid in full each month in which no interest charges will apply. The interest free grace period is 28, 29, 30 or 31 days from the closing date of the current statement to the closing date of the next statement depending on the number of days in the calendar month in which the closing date occurs. The number of interest free days varies based on a variety of factors, including when charges are posted to your account, whether your account is in good standing, and the closing date of your statement

1 https://business.financialpost.com/entrepreneur/small-business/how-to-build-your-small-business-credit-score-and-keep-it-high