Business Credit Profile Definition

Business Credit Profile is a record of a company's financial history, including its credit history, payment behavior, and financial transactions, used by creditors and lenders to assess the company's creditworthiness and make decisions about extending credit or loans.

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Your business credit score/profile is used to determine whether you get a loan for your business. The better your business credit profile, the lower your interest rate. Also, vendors sometimes offer better payment flexibility for businesses with better business credit profiles and credit scores.  

Building a Business Credit Profile/Credit Score

A business credit profile/credit score definition is similar to your personal credit score and credit report. You need to take time to build your business’s credit profile and credit score to reap benefits. 

Since a business credit profile/credit score’s meaning is to identify your business’s debts and ability to pay bills on time, you’ll need a number to identify your business to credit reporting agencies. Your business can get an Employee Identification Number and a Dun & Bradstreet Number (D-U-N-S Number). These numbers allow creditors to accurately report your business transactions to credit agencies.

To build your business credit profile/credit score, you need to separate your business credit from your personal credit. Forming a separate business entity can help with applying for credit solely in the name of your company. Opening a business credit card and asking vendors to report your payments to credit agencies can also help.  

Business Credit Profile and Business Credit Score Benefits

The advantages of having a business credit profile and credit score are that lenders, vendors, and landlords will have an idea of how your business handles its finances and whether it pays its bills on time. A business credit profile/credit score’s benefits are directly related to how well you manage your company’s finances. Banks, for example, may give you favorable interest rates if you pay your bills on time. On the other hand, if your business doesn’t have any business credit profile/credit score, or if the score is bad, you may face obstacles in finding funding, lower insurance premiums, or vendors who will work with you. 

Business Credit Profile/Credit Score Considerations

A business credit profile/credit score helps you grow your company when you take steps to actively build business credit. When a business is just getting started, it has no credit. Thus, small businesses often rely on an individual owner’s credit initially. 

You’ll want to consider building your business credit profile and credit score early so that your personal credit is not always tied to your business. For example, you may carry larger balances due to business purchases, even for short periods. If your business and personal credit is not separate, carrying these large business credit balances will likely have a negative impact on your personal credit rating. 

Other Names for a Business Credit Profile/Credit Score

Sometimes a business credit profile is called a business credit report or commercial credit. 

Business Credit Profile/Credit Score Examples

A business credit profile/credit score lists your business’s basic information, a credit score, the basis for that score, and a summary of your business’s credit history. Examples of business credit reports are available on the websites of the three leading business credit reporting agencies: Experian, Dun & Bradstreet, and Equifax. 

Business credit scores are on a scale of 0-100, with 100 being the highest score. An example of a good credit score is in the 80-100 range. 

Summary

A business credit profile/credit score describes your business’s financial transactions, including any outstanding loans or liens. A business credit profile and credit score gives banks, lenders, investors, and other entities an idea of your ability to manage your business’s finances.

We Can Help

We can help you form a business entity and start building business credit with our Business Formation service. We also offer business resources such as 8 Steps to Establishing Business Credit. Our customer support team can help you with any questions.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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