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Fincash » Credit Score » Good Business Credit Score

4 Major Benefits of a Good Business Credit Score

Updated on June 13, 2024 , 6721 views

Are you planning to take fundings for your business expansion? If yes, then having a good business Credit Score should be your first goal! Many business owners neglect the importance of a good score until they face a loan rejection.

Benefits of Having a Good Business Credit Score

Well, a good company score is the lifeline of your business! This will be your saviour when you don’t have enough cash hands-on to fund your business needs.

Advantages of a Good Business Credit Score

There are many advantages to having a good business score such as-

Easy loan approvals

A business credit score of 80+ and above is considered to be a good score. Lenders get impressed and are confident to lend you money. This way you will be able to get loans quickly.

Loans with lower terms & better interest rates

A good score proves your creditworthiness and this gives you the power to negotiate better loan terms. Lenders will also be able to offer you favourable interest rates. But, with a bad score, even if you get a loan, it will come with higher interest rates.

Better trade-credit

Strong credit will not only help you to get better loans but also get more favourable terms from suppliers.

Protects your personal finance

Your company debts will be reported on your company’s Credit Report. This saves your personal credit life from being impacted by any financial woes your company may face, and vice versa. However, it’s important to review your personal credit report too. When you apply for a business loan, lenders may review your personal score to check your credit responsibilities.

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Difference Between Personal Credit Score and Business Credit Score

There are a few differences between personal and business credit score, such as-

  • A personal credit score is where you check your personal creditworthiness. A business credit score reflects whether a company is in a good position to receive a loan.

  • A personal score is scored between 300-900 scale, whereas business score is scored on a 1-100 scale.

  • Unlike personal score, business credit scores are publicly available. Anyone can go to the reporting agency and look at your business score.

How to Get a Good Business Credit Score?

Good payment history

A Good Credit history shows your creditworthiness and this helps the lenders to process your loan application quickly. Any delay or missed payments may drop your score, which can affect your future credit applications.

Limit your credit usage

Avoid over utilizing your Credit Limit as this can be one of the major reasons for a low credit score. Also, exceeding the credit limit gives an Impression to lenders that you are having trouble meeting business financial needs.

Manage your company’s debt

The more credit you take, without repaying the earlier ones, will hamper your business credit score. Therefore, before applying for a new business loan, ensure your company repays the pending debt. Managing the debt is important to keep business credit scores high.

Keep an eye on red flags

Lastly, it is equally important to review your business credit report regularly to monitor the red flags. Some of the red flags are:

  • High credit utilisation
  • Negative consumer reviews
  • Loan defaults & bounced cheques
  • Write-offs
  • Negative cash flows

Resolution of these issues can improve the business score of your company.

How to Check your Business Credit Score?

RBI-registered Credit Bureaus in India like CIBIL, CRIF High Mark, Experian and Equifax have access to your business credit score. You can go to their respective website and check your credit score and report.

Conclusion

Whether it is an established business or a start-up, every company needs to maintain a strong score for future business success. Also, with strong credit, you are poised to build relationships with banks, lenders, customers, suppliers, etc.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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