Small business credit score

Business Credit Scores: What You Need to Know

You may already be familiar with your personal credit score. The most common example of this is when you want to rent that waterfront condo and the landlord asks you to provide a credit report (besides all the other required documents) from one of Canada’s two credit bureaus, TransUnion or Equifax. They will then evaluate your creditworthiness and decide if you are reliable enough to pay your rent on time.

Your business credit score essentially serves the same purpose. If you want to apply for a loan, lenders and creditors look at your business credit score to help determine how likely you are to default or pay off that loan on time.

So what makes a business credit score different from a personal credit score?

Here’s what you need to know:

Know the Two Canadian Credit Reporting Agencies

There are two credit reporting bureaus in Canada that can provide you with your business credit scores — Equifax and TransUnion. For a personal credit score, the scale is between 300 to 850. Scores provided via an Equifax Business Credit Report, or our free business credit score product, however, are typically between 0 to 100 (but this can vary widely depending on the bureau, and type of score.)

For instance, Equifax issues four different credit scores:

  • Credit Information (CI) score: 0 to 70
  • Payment Index: (PI): 0 to 99
  • Commercial Delinquency Score (CDS): 101 to 662
  • Business Failure Risk Score (BFRS): 1001 to 1722

It’s good to keep in mind what each bureau factors in when developing business credit scores — you could end up having a higher score with one and a lower score with another.

Want access to your own business credit score? Keep tabs of your businesses’ financial health here

Your Business Credit Scores are Public!

Unlike your personal credit score – where you must authorize a credit inquiry before an organization can check your personal credit score – business credit scores are publicly available.

Essentially anyone can go to one of the reporting agencies listed above, pay, and check your business credit scores. You never know who might check it (could be your nosey neighbor!) so it’s always a good idea to build and maintain a good credit score for your business.

Building Your Business Credit Scores Takes Time

As a small business owner, you definitely have a lot on your plate already. You want to become successful, grow rapidly and profit — all while providing the best products and service to your customers. But it’s always a good idea to set some time aside and think of ways to build your credit scores, especially if you want to:

  • Get approved for business loans with less hassle and at lower rates
  • Take out business loans without signing a personal guarantee
  • Make your business look good to investors, insurance companies and potential business partners
  • Expand your business in the near future
Here are a few simple steps that may help improve your business credit scores:
  • Pay all your bills on time or in advance if possible
  • Don’t use more than 20 to 30% of your available credit
  • Get lines of credit in your business’ name
  • Check your credit scores regularly

Overall, having a good business credit score is important because it ultimately determines whether or not you can qualify for a loan. And believe it or not, your score could be the difference between saving a couple hundred or a couple thousand dollars, depending on the financial product you qualify for.

Now go out there and make your business bloom, but don’t neglect your business credit scores.

Looking for a small business loan? We got you covered! [click here]