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Business Credit Scores: Why They Matter

Your personal and corporate credit scores can have a significant impact on the opportunities available to you and your business in the financial world. Consulting with a firm that specializes in Sugar Land real estate law and civil litigation matters can help you understand the differences between business credit scores and personal credit ratings. Here are some guidelines to keep in mind when navigating the credit marketplace.

Business Owners and Personal Credit Scores

Financial institutions look at the personal credit histories of business owners as well as the performance of the company when determining whether to extend credit to these enterprises. As a result, maintaining a clean credit record as an individual can be a significant advantage when operating your business. A number of factors go into your personal credit score:

  • Past payment history
  • Bankruptcies within the last 10 years
  • Negative information from the last seven years
  • Amount of available and expended credit
  • Length of credit history
  • Number of hard and soft inquiries in the last two years

Each of these factors can make a difference in your ability to acquire consumer credit and to manage the finances of the businesses you own. Working with a Katy small business attorney can provide added support for this process. Consumer credit scores above 700 are considered very good and are often rewarded with lower interest rates and more favorable terms by lenders.

Corporate Credit Scores

Your business credit score, by contrast, is usually a number between 1 and 100 with a ranking of 75 considered excellent by most lenders. Establishing a business credit rating can be difficult for start-up companies. One of your first moves should be to register your company with the big three business credit bureaus:

  • Experian
  • Equifax
  • Dun & Bradstreet

To accomplish this, you must have a federal tax ID number. Registering your company will allow your business partners, vendors and lenders to report your corporate credit activity without affecting your personal credit score. Not all lenders and vendors report payment histories to the business credit bureaus. In some cases, you can request that your activities be reported to help you establish a credit history for your start-up company.

How Your Business Credit Scores Impact Your Corporate Future

Low credit scores can limit the types and amounts of loans available to your small business, which can significantly affect your ability to acquire property, equipment and inventory. Maintaining a high business credit score separate from your personal score can allow your company to achieve greater success and increased access to financial resources when you need them most.

The experienced attorneys at The Law Office of Henry Jakob can provide you with Katy estate planning, civil litigation and real estate services designed with your needs in mind. Call us today at 832.879.2244 to learn more about our full line of services. We look forward to serving your business and personal legal needs.

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