How to Get a Good Business Credit Score

Small business owners who are still in business know a favorable credit history is the foundation of success. It not only saves money on interest rates, but also opens access to additional capital when needed.

Because lenders look at business credit scores when making decisions, it's imperative that you educate yourself on the following three fine points of establishing and maintaining good business credit.

1. Just because you own a small business doesn't automatically mean you have a business credit score. Credit reporting agencies need a minimum amount of information to generate a business credit report and score. If a business doesn't have at least one account and/or demographic element (such as length of time the business has been credit active or number of employees) listed with a credit agency, then a credit report and score will not be generated.

To help establish a business credit score, make sure your vendors are reporting your payment history to one of the major credit reporting companies. If they aren't, encourage them to do so. The more vendors that report a good payment history to the credit reporting companies, the better your business credit score will be. If you're willing to switch vendors or take on new ones, many of the credit reporting companies have lists of who does report this information automatically.

2. Many small business owners don't separate their business expenses from their personal expenses. In fact, half of all small businesses use some form of personal credit to finance their businesses. But there are drawbacks to using your personal credit score, rather than a business credit score, to secure funding.

The dangers of relying solely on personal credit are fairly obvious: If your business ever wobbles, your personal credit score could take a hit. What's more, many creditors have begun moving away from relying on personal credit alone when judging the financial health of a small business, because it's not a good indicator or future business behavior. Instead, many creditors are taking advantage of new blended commercial-scoring tools that integrate both personal and business credit attributes to predict small business risk.

3. Anyone can look at your business credit score. Unlike personal credit reports, which are regulated and can be viewed only with your permission, commercial credit reports are open to the public. So it's imperative to regularly monitor your credit score, especially now, as identity theft is a growing problem. Scan your credit file for errors. As the business owner, you may request that the credit reporting companies correct any mistakes.