What’s your business credit score? (And how to improve it!)
You’re likely familiar with your personal credit score, which reflects your borrowing history, credit applications, and repayment habits. But did you know that, as a business owner, your company has its own credit score too? If you didn’t, you’re not alone.
A surprising 93% of Australian SMEs are unaware of their business credit score. This lack of knowledge can be a significant barrier to securing finance, potentially hindering business growth and preventing owners from capitalising on important opportunities.
Understanding business credit scores
Your business credit score plays a crucial role in showcasing your financial health and borrowing capability. These scores range from 0 to 1200, with the following general benchmarks:
833–1200 = Excellent
510–832 = Average
0–509 = Poor
A strong business credit score not only boosts your credibility but also expands your financing options. You can check your business credit score through recognised reporting agencies like Equifax, illion, or Experian.
But what exactly goes into your business credit score? Much like a personal credit score, it considers your business’s details, borrowing and repayment history, and the number of credit inquiries made.
It may also include information from past businesses you’ve been involved with. For instance, if a previous business under your ownership defaulted on a loan or missed payments, that information could carry over to your current business and impact your score.
How to improve your business credit score
Looking to achieve an ‘Excellent’ rating? Here are three effective strategies to boost your business credit score over time:
1. MAKE TIMELY REPAYMENTS
The simplest way to lock in a good credit score is to make payments on time. That means taking care of bills and loan repayments before they are overdue. If you are seen as unreliable with your fiscal responsibilities, that will reflect negatively on your credit report.
If you find that there are simply not enough hours in the day to tackle your administrative duties, it could be cost-effective to invest in accounting software that automatically alerts you about upcoming invoices, and you can even set up auto-transfers to take care of payments when they are due.
2. MINIMISE YOUR DEBT
If you’ve ever taken out a mortgage, you will know that lenders prefer you to have minimal – or zero – debt. The same goes for your business. Eliminating your debt, or at least paying down as much of it as possible, will improve your business credit score over time. And while it may seem counterintuitive, opening a new line of credit can actually be beneficial as it will increase the total amount of credit available to your business.
"Ensuring consistent cash flow is crucial for sustaining a solid business credit score," explains Brandon Hamilton, Managing Director at Hamilton Finance. "This is why access to lines of credit has become increasingly important for small and medium-sized enterprises (SMEs) today. Having a reliable source of capital allows SMEs to manage unexpected expenses, invest in growth opportunities, and maintain their financial health, ultimately contributing to a strong credit profile."
3. CORRECT ANY ERRORS IN YOUR CREDIT REPORT
The final reason why you should regularly check your credit score is because the reports aren’t always 100% accurate. There may be instances where you will come across a reporting error or factual mistake which has negatively impacted your score. If this happens, make sure you begin the dispute-resolution process to have the error struck off. If the error stays on your report, you will continue to suffer unnecessarily due to incorrect information.
Hamilton Finance works with small businesses across all industries, to help them maintain cash flow and get access to commercial finance solutions. Contact Hamilton Finance today on 1300 023 173 to learn how our expertise and lending products can help you strengthen your business and improve your credit position.
