Unlock Business Success: Check & Boost Credit Ratings

By: Aaron Robbins0 comments

The health of your business is vital for its continued success long into the future. One of the markers of your business health is your business credit score. Now, while your company credit report doesn’t always reflect how things are for you at the present time, it does provide valuable insight as to what your strengths and weaknesses have been in the past as a business and provide guidance on how you can strengthen your business.

To find out how to unlock business success by checking and boosting your credit rating, read our brief guide, below.

Is a business credit score different to a personal credit score?

Just as your personal credit score (or credit rating) is a numerical reflection of your conduct when borrowing and repaying money, so too is your business credit score — just for your business! Also, similar to personal credit scores, business credit scores range between 0 and 1,200, depending on the credit bureau. However, business credit scores are different from personal scores, as they don’t include the same personal information that is used to calculate an individual’s credit score.

What information goes into determining business credit scores?

There are many different pieces of information that go into determining credit scores. Credit reporting agencies rely on the information on your business credit file to determine your credit score, including:

  • How many credit enquiries you’ve made, including the types of credit that you’ve applied for. Generally speaking, if you have many credit checks, it can negatively impact your credit score.
  • How long your business has been operating. Newer businesses are often deemed to be riskier than established businesses, as they have yet to prove their longevity, cash flow and borrowing behaviour.
  • All of your organisation’s commercial credit information, such as any defaults on business loans, judgements, external administration or court decision.
  • Any director information as listed on a director’s file, including defaults, bankruptcies or external administration segments.
  • Any information that is available on public records, which may include lawsuits, judgements, delinquent taxes or recorded liens.
  • You’ll also find that the details of any Personal Property Securities Register (PPSR) registrations that are held on a business are listed on your credit file, and can affect your credit rating.
  • The payment history of any existing business credit, such as business credit cards or a business loan.

What is a good business credit score?

Typically, a ‘good’ business credit score is one between 625 – 725. A score that lands between 725 – 825 is generally considered ‘very good’, and scores above 825 are deemed ‘excellent’.

Why should business owners check their business credit report?

Credit reports play an important role in business finance, as they provide credit providers insight into whether a business or company is going to be a credit risk, or whether they can confidently lend money to them. Therefore, in order to unlock business success, business owners should check their credit report often to get an insight into their company’s financial health and check whether there are any discrepancies on the report that could work against them when they apply for finance in the future.

The primary two benefits of maintaining a sound business credit score are:

1) Suppliers are likely to give you more favourable payments terms

2) Lenders are more likely to approve applications for credit and capital

Identifying discrepancies in business credit reports

What happens when a credit reporting agency has information listed incorrectly against your legal entity or directors? Well, just as with personal credit scores, any information that’s recorded by credit bureaus that is incorrect can have a massive impact on your business score!

More importantly, any credit inquiries that you don’t recognise could also indicate that someone is fraudulently using your business details to obtain finance using your company information. Maintaining vigilance over your business credit report and file can help protect your credit score as well as your business identity!

Who checks my business’s credit score?

If you’re relatively new to business, it might surprise you to learn that suppliers and vendors may perform a soft pull credit check on your business before entering into agreements. This helps other companies determine if your business is high or low risk to take on as a customer. This is another reason to ensure that you maintain the financial health of your business as best you can, and know what’s on your credit file so that you can discuss any concerns with potential suppliers and vendors.

How to check business credit rating

Credit reporting agencies in Australia are legally required to provide you with a free copy of your business credit report once every three months. There are three main credit reporting agencies where you can get your free credit score:

Business owners can approach a credit reporting bureau directly to check their business credit score, and access information that’s listed on their business credit report. Gaining insight into your credit history can also help you understand what decisions to make in the future to keep improving your credit score — such as what type of finance to apply for!

What if I need finance but have yet to improve my business credit score?

If your track record doesn’t support a strong business credit score, but you’re in a position where you need to apply for a credit product, then there are a few things you can do to help improve your business credit score, and therefore your chances of accessing the business finance that you need:

  • Maintain your company’s cash flow. A strong cash flow is indicative of sound financial decisions and strong business management.
  • Limit the amount of credit applications you make. The more applications that you make, the more ‘desperate for money’ you may appear to a credit provider.
  • Pay invoices on time. This may seem an obvious answer, however, particularly in small businesses, time can get away from bustling business owners, and invoices that slip through the cracks can be handed over to debt collection agencies which will negatively impact your credit file further!
  • Similarly, paying your loan obligations and business credit card statements on time can improve your financial status over time as your payment history is noted on your credit file.
  • Opting for a secured loan can also help improve your chances of accessing finance if you have a low credit score. Secured lending uses one of the company’s possessions or assets as collateral against the loan.
  • Finally, you can also look to access private funding for your business finance needs. Private lenders work with Australian businesses

At Diverse Funding Solutions, we don’t rely on your business credit score to approve finance

As one of Australia’s fastest-growing specialist private lenders and finance broking firms, Diverse Funding Solutions is well-positioned to help Aussie businesses access the finance solutions they need — even with low credit scores. With access to over 200 of Australia’s top private lenders, we can help businesses manoeuvre around credit checks, to keep their business moving forward while they work on building their business credit score up.

To learn more about how DFS could help your business, reach out to our friendly team.

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