How does a corporate credit score operate, and what is it?

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A business credit score provides credit agencies, loan issuers and vendors or suppliers with a general idea of how trustworthy you are when it comes to borrowing money for your business. Just as with your personal credit score, a higher business credit score tells these interested parties that you’re more creditworthy. If you’re a business owner and you want to establish strong business credit, keep reading to learn more.

What is a business credit score?
A business credit score is a credit score that applies to businesses, instead of individuals. Generally speaking, business credit scores are determined using information from a business credit report, which can include such company details as the number of employees a business has, historical data of the business, past payment history, account information, amounts owed and more.

When it comes to business credit scores, you may notice that they don’t fall in the same numerical range as personal credit scores. Most business credit scores are ranked on a scale of 0 to 100, while business scores using the FICO Small Business Scoring Service (FICO SBSS) range from 0 to 300.

Benefits of a business credit score
Building a strong business credit score can help small business owners in several several ways:

Personal finances are kept separate from your business finances. Having a business credit score can help you access credit for your business without leaning on your own personal credit. This can be immensely helpful when it comes time to file your taxes each year as well, since the U.S. tax system requires that you keep your business and personal finances separate if you plan on deducting expenses. This separation can also help ensure your personal assets aren’t used to offset any financial issues with your business.
Access to financing is easier. A good business credit score can help you take out business loans at lower interest rates. If and when you take out a business loan, you won’t have to sign a personal guarantee that makes you personally liable.
Insurance policy rates may be lower. Insurance rates can be high, especially for a growing business. A good business credit score may help your business attract low rates.
Differences between personal and business credit scores
There are plenty of differences between your personal credit score and your business credit score.

Business credit scores are on a smaller scale
While personal credit scores typically fall on a scale of 300 to 850, business credit scores range from 1 to 100.

Anyone can check a business credit score
While personal credit scores are private, accessed in specific situations, anyone can check a business credit score to see how a business ranks.

Business credit scores are determined using different factors
Business credit scores are determined using your business’s payment history, age of credit history, debt and debt usage, industry risk and company size.

Personal credit scores are determined using your personal payment history, amount of debt relative to total available credit, new credit, credit mix and average length of credit history.

Business credit scores use your Employer Identification Number (EIN)
While your personal credit score is tied to your Social Security number, your business credit score is tied to an Employer Identification Number — or EIN. This helps you keep your personal financial information private while you build and maintain your business credit score. You must legally register your business to obtain an EIN.

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