ATHC is aimed at empowering U.S. small business owners to smoothly grow and expand their businesses. In addition to providing working capital, another integral part of this commitment is giving small business owners the tools and information that they need to make solid business decisions. Answering the question ‘What is a good credit score and how to establish and maintain it?’ is very important for long-term prosperity.
Why is credit score important?
Credit rating helps lenders make decisions regarding loan granting. To some extent, it is a X-ray image of a business which shows you the true state of affairs in a company and helps predicting a situation. The distance of the value from the highest credit score shows the degree of probability that you will reimburse your credit without delay. Credit score range is also called the risk score range, because helps lenders assess their risks of investing capital in your business. After all, it is important for them to foresee whether a small business owner will be able to loan back according to the contract.
Thus, highest credit score is, biggest chance for you to obtain a loan is. And in the context of the interest rate, the difference can vary between hundreds and even thousands of dollars. What is a good credit score? It is your possibility to do what you want to do. You can rent the apartment of your dream or buy necessary equipment for your business.
How it looks like
When we study at school, we are given a report card where we can see our progress. When we develop our business, we have a credit score range instead of a report card, where the highest grade is the highest credit score to which we aspire. But unlike school grades, the history of credit scores is not kept recorded, but is re-generated each time the lender requests it.
As a small business owner, you may need fairly large funds. When making a decision on granting a credit, creditors take into account your past activity, major purchases, such as a house or a car. Based on this information, a general picture of financing is formed, which helps lenders to decide whether they can trust you, whether you will return their money on time.
What else is needed
Thus, the decision of lenders to issue a loan to your business is not only affected by a credit score range. What is important is a complete picture of your business performance, including aspects such as the types of loans you took, the total amount of your debts, as well as any other information that gives an idea of your creditworthiness. Lenders can even compare your income and expenses for a month or year, depending on the type of lending you are requesting.
A credit score range reflects the difference in financial success and failure of companies. A recent study by Manta has shown that 72% of small business owners have no idea what a credit score range is and why they need it for their business. 60% don’t know where to find the information about lowest and highest credit score. In order for small business owners to fuel their growth, it is important to get educated on business credit.
What is a business credit score range?
A business credit score is a rating of your business’ ability to repay your debts. While it is common for many small business owners to use their personal credit when their businesses are in the startup phase, it is very important to establish credit in your business’ name as soon as possible. A good business credit score range can help determine whether or not you will receive financing when your business needs it. If you have the highest credit score, you will know for sure that your supplier will extend a line of credit for materials and supplies. What is a good credit score’s importance for business? This key aspect can never be underestimated.
Factors affecting business credit scores are mostly similar to those affecting personal credit scores. But there are also some specific ones.
Your business can get the highest credit score. For this, lenders will assess the following:
- Overall industry risk
- Your company size
- Credit utilization ratio, i.e. percentage of available and utilized credit.
- Payment history
- Credit history length
- Amount of debts
- Public records, such as court judgments, bankruptcies etc.
When you wonder ‘What is a good credit score?’ your lenders are wondering what is your company and its financial history.
What is the difference between a business credit score and a personal one?
While there are similarities between business credit scores and personal credit scores, they are two very different things. Your business credit score reflects specific information about your company’s debt repayment, public records, as well as information pertaining to company owners and officers. Unlike your personal credit score, your business credit score can be viewed by anyone, including potential clients and vendors. Thus, you have to make efforts in maintaining the highest credit score possible.
Business credit score range contains 0-100 points, where 100 is the highest credit score. A good business credit score falls at 75 and above. The influencing factors are payment history, number of employees, monthly and annual revenue flow, and the industry that your small business is in. So, if you ask yourself ‘What is a good credit score for my business?’ you are the one who make a difference.
What if my business is far above the highest credit score?
Your business can rise in credit score range by consistently paying your bills on time. Staying aware of how far your business is from a highest credit score is also very important. You can do this by monitoring your position on a regular basis and setting up alerts. Maintaining a clean public record and receiving funding from companies, such as ATHC, that report to credit bureaus are also excellent ways to get closer to the highest credit score. Another good thing is to keep your credit utilization ratio above 30%, do not max out.
What is a good credit score from our point of view? How we can raise your business profile? For more information on how ATHC can help your small business, please give us a call at +1.212.201.1755