Understanding Your Business’s Credit Profile

December 14, 2012 — Leave a comment

How Important is Your Business’s Credit Profile? – It May Be More Important than You Think

Your business credit profile is your business calling card to potential associates or clients. It works similarly to the way a “resume” works for employees (putting their best face forward to possible employers). Your business profile contains critical information that helps businesses make a more informed decision as to your business worthiness; and they base decisions like entering a business agreement with you, funding a project you have, or recommending your services to other companies on this profile.

Like a resume, it’s important that everything in your credit profile be accurate and positive. While no one knows your business like you do – no one really knows how profitable it is, except for you. However, when it comes to negotiations, other businesses want facts and those come from a business credit score report, and if this is unfavorable, it can cast a very negative light on your business.

Understanding Business Credit Profile

You should ask yourself a few questions when referring to your business credit profile, as these will give you a better understanding of what that profile represents to others:

  • What does your credit score tell other companies about your worthiness, level of commitment and standards?
  • How does your business credit score affect the interest on loans you pay? Do you get the best terms?
  • If your scores were lower at any time, have they improved enough to consider a refinance or better loan terms? Have you been offered a credit extension?
  • Do current suppliers offer you credit terms of 30, 60 or 90 days; alternatively, are you required to pay for supplies upon delivery? Consider your competitors; do they get better offers, prices and terms than you do?

If you answered any of these questions unfavorably, or are oblivious of the answers, then you may not have the best business credit profile – and that could be costing you money.

Find Out What’s in Your Credit Profile

If you are unaware of the contents of your profile you need to find out. The information that this profile contains refers to your business credit worthiness and is based on the following data:

  • Credit card payments, bill payments and financial information given by suppliers. When these payments are registered as being timely, then your business credit worthiness improves, but failure or late payments will lower your business credit score and negatively affect your credit profile and worthiness.
  • Just as favorable information can affect your profile in a positive way so judgments, liens and suits can negatively affect your credit worthiness.
  • Corporate financial reports are also held here.
  • Grants, loans, contracts.
  • If a Dunn’s and Brandstreet credit profile is pulled, then any investigations and reported data placed by you or others will also be posted here.

Of course, of all this data, the most significant is that of how promptly you pay loans, credit card debt, mortgages and bills.

The Score

A mathematical equation is configured of all of this data, giving your business a credit score average. Payments that are late or those that go into default can significantly decrease this score. On the other hand, when payments are made on time, the more your business credit score will increase.

Protecting Your Business Credit Profile

Because this profile is often the basis for important decisions like how much money a lender will loan you, how much credit a supplier will extend, or even the amount of interest rates charged to you; it is important you know what is in that credit profile and monitor it frequently for changes or inaccuracies.

Identity fraud is on the rampage, and often it is easy for fraudsters to get your credit information and use it to steal, buy or borrow things which they never intend to pay back. By pulling your credit report frequently and clearing up any debt you haven’t made, or which hasn’t been registered as being paid, you can maintain your profile in good standing or even increase your score so you get better credit terms offered to you in the future.

This guest post was contributed by Darren Bechard, a freelance writer and independent business researcher. He mainly writes about business finance and enjoys sharing his tips and insights on numerous blogs. Find out more about short term loans for business.

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