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What’s Your Business Credit Score

You are probably aware that you have an individual credit score that takes into account how much money you’ve borrowed, the number of credit applications you’ve made and your repayment history. But did you know that business owners also have a business credit score? If you didn’t, you’re not alone.

A whopping 93% of Australian SMEs don’t know their own credit score, which could be limiting their ability to access finance, grow their business and outpace the competition.

Everything you need to know about business credit scores

Your business credit score is important because it is not only an indicator of your financial health, but it also shows whether or not you are in a strong borrowing position. If this isn’t the case, it’s time to improve it.

Business credit scores appear on a scale of 0 to 1200, with the general consensus being:

  • 833–1200 = Excellent
  • 510–832 = Average
  • 0–509 = Poor

Not only does a high score look good for you as a business owner, but it can also open you up to a wider selection of lending solutions. The good news is you can check your credit score with a recognised reporting agency like Equifax, illion or Experian.

So what exactly does your business credit score mean? In much the same way as a personal credit score, it details your business’s company details, borrowing history, repayment details and the number of credit enquiries you’ve made.

It may also include information on other businesses you have been associated with previously. For example, if you formerly owned a business that defaulted on a loan or missed repayment deadlines, then this information will have transferred across to your current business and has likely affected your credit score.

Looking to achieve an ‘Excellent’ rating on your business credit score? Here are three easy ways to boost it over the long term.

1. Make timely repayments

The simplest way to lock in a good credit score is to make payments on time. That means taking care of bills and loan repayments before they are overdue. If you are seen as unreliable with your fiscal responsibilities, that will reflect negatively on your credit report.

If you find that there are simply not enough hours in the day to tackle your administrative duties, it could be cost-effective to invest in accounting software that automatically alerts you about upcoming invoices, and you can even set up auto-transfers to take care of payments when they are due.

2. Minimise your debt

If you’ve ever taken out a mortgage, you will know that lenders prefer you to have minimal – or zero – debt. The same goes for your business. Eliminating your debt, or at least paying down as much of it as possible, will improve your business credit score over time. And while it may seem counterintuitive, opening a new line of credit can actually be beneficial as it will increase the total amount of credit available to your business.

“Maintaining sold cash flow is essential for a healthy business credit score,” says David Crook, Managing Director at Nero Financial. “You can only make repayments on time and pay down your debts if you have the capital to do so, which is why having access to lines of credit is so beneficial for SMEs these days.”

3. Fix any mistakes in your credit report

The final reason why you should regularly check your credit score is because the reports aren’t always 100% accurate. There may be instances where you will come across a reporting error or factual mistake which has negatively impacted your score. If this happens, make sure you begin the dispute-resolution process to have the error struck off. If the error stays on your report, you will continue to suffer unnecessarily due to incorrect information.

Nero Financial works with small businesses across all industries to help them maintain cash flow and get access to commercial finance solutions. Contact Nero Financial today or call 1300 025 949 to find out how our expertise and lending products can help you boost business and improve your credit score.