Building Your Business Credit Score

Your credit score represents your credit worthiness, which comes to play if you need a bank loan or other financing services. Whenever customers apply for a credit card, get a loan or take out a line of credit; creditors most likely review their credit report to determine whether they're a good or bad credit risk. A higher score indicates the customer is more likely to pay on time and continue paying until the loan is paid. It may also lead to lower interest rates.

What's Included in the Credit Report

The credit doesn't say anything like "Bad Risk" or "Good Risk." The report simply provides the data and the lender decides whether the customer is a good or bad risk.

• Basic information. Name, address, social security number, phone number, etc.
• Accounts. Lists the accounts customer has, when customer opened it, the type of account, the amount of credit, how much the customer pays monthly, whether customer has missed payments or paid late and closed accounts.
• Credit history. Payment history with banks, finance companies, mortgage, retail stores and any other business that provided credit to the customer.
• Requests. List names of anyone who has requested a copy of the customer's credit report or have authorization to view it.
• Public records. This information is freely available and includes tax liens, bankruptcies and court judgments.

For businesses credit reports, only those businesses that you do business with can see your credit report.

Credit Score Factors

The following factors affect credit score:

• Making credit payments on time. The biggie.
• Having no credit. Not a good thing because financial organizations won't have any information to go on, thus perceive you as a higher risk.
• Keeping account for a long time. If you need to, put one charge on your credit card every month and pay it off when the bill comes.
• Ensuring the most recent credit payments are on time. While always paying on time is key, your most recent payment history has a bigger impact over older transactions.

FTC-authorized website AnnualCreditReport.com allows you to request a free credit report once every year from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.

What to Look for in a Credit Report

It's important to check your credit report once a year because repairing bad credit is an expensive and lengthy process.

When you get the report, check for the following potential errors:

• Late payments when you paid on time.
• Accounts that don't belong to your business.
• Bankruptcies occurring over 10 years ago.
• Inactive accounts leftover from bankruptcy.
• Any negative transactions occurring over seven years ago.

When you find an error in the report, take care of it as soon as you can. The report provides instructions for disputing errors.