Understanding Business Credit Scores and How They Work

business credit score

Borrowing is a critical component to the success of any business. From small startups to major corporations, companies rely on borrowed funds to sustain and expand their business. But with every loan comes a risk of default. Lenders are discerning and careful about which business they choose to extend credit to. Without an adequate business credit score, a company could find itself struggling to get necessary loans.

What is a business credit score?

A business credit score is a credit rating that signals the likelihood a business will repay its loans on time and not default. Lenders rely heavily on business credit scores to determine loan eligibility and interest rates. Business credit scores use a different scale than personal credit scores, with scores ranging from 1 to 100. The higher the number, the more creditworthy a business is deemed to be. To get a small business loan, your business will need a score of about 75, according to the US Small Business Administration. Credit scores can also have an impact on the ability of a business to sign a lease or purchase items on credit from suppliers.

There are three major credit bureaus that rate businesses in the US—Dun & Bradstreet, Equifax, and Experian.

What affects a business credit score?

Several factors are used to determine business credit scores.

  • Credit history. Business credit reporting agencies look to see how old a business is when determining its score. Older businesses with long histories of financial stability get better scores than newer businesses.
  • Payment history. If a business has had any missed or late payments, that will reduce its credit score. Even a single late payment can have a significant effect.
  • Debt utilization. Debt utilization is the ratio of credit used by a business to credit available to a business. Establishing sustainable business cash flow and taking on as little debt as possible can help improve your score.
  • Public records. Past bankruptcies, collections notices, liens, and other indications of difficulty making payments can all count against your credit score.
  • Demographic information. Credit bureaus will also make judgments about the financial health of a business based on its industry risk, location, and size.
  • Business failure score. This is a measurement of the risk your business will go bankrupt in the next 12 months. Credit bureaus factor it in when calculating credit scores.

Business credit score vs. personal credit score

Business credit scores and personal credit scores share many overlapping characteristics. They do, however, have different functions and, therefore, have some key differences. 


  • How they’re similar. Both business credit scores and personal credit scores are used to signal to lenders the creditworthiness of a borrower.
  • How they’re different. Business credit scores rate the creditworthiness of businesses, while personal credit scores rate the creditworthiness of individuals. 

Scoring system

  • How they’re similar. In both scoring systems, the higher the score, the more creditworthy a borrower is deemed to be.
  • How they’re different. Unlike personal credit scores, business credit scores use a scoring scale of 1 to 100, while personal credit scores use a system that ranges from 300 to 850. 


  • How they’re different. If a person sees information that they believe is incorrect on their personal credit report, they may challenge that information and the credit bureau is legally obligated to respond. However, if a business issues a challenge alleging incorrect information, the credit bureau is not legally obligated to respond. When credit bureaus do respond, they may be less comprehensive and informative than responses to personal credit corrections.


  • How they’re different. A personal credit account stays with an individual for their entire life. A business credit account can change ownership if a business is bought or sold, or even close down if a business shuts.

Credit availability

  • How they’re different. Generally, businesses tend to have a higher capacity for credit than individuals.

How to improve your business credit score

  1. Improve your personal credit score
  2. Sign up for business credit cards and net 30 accounts
  3. Minimize credit utilization
  4. Pay all your bills on time

1. Improve your personal credit score

For all business structures except corporations, the owner’s personal credit scores affect the credit score of the business. The degree of the impact varies depending on the type of business structure. Sole proprietors’ business credit will be based almost entirely on their personal credit scores because they have personal liability for the company. On the other hand, the impact of owners’ credit scores on limited liability companies is less direct. Either way, making sure your personal finances are in order is important, especially for new small business owners. Because of the lack of long-term data on the creditworthiness of the new business, credit bureaus may rely largely on the personal credit histories of the business’s owners. 

2. Sign up for business credit cards and net 30 accounts

Some of the easiest ways to show lenders your creditworthiness are through business credit cards and net 30 accounts. Business credit cards are available to new businesses through major financial institutions such as banks and credit card companies. By paying your business expenses using a credit card, and making sure to pay your bill on time or early every month, it shows credit bureaus that your business is creditworthy. Additionally, business owners can also sign up for net 30 accounts, which allow them to buy goods and services needed for their businesses directly from a vendor using credit. The business owners are responsible for paying vendors within 30 days of their purchases. Using net-30 accounts regularly and paying the bills on time can help you build business credit.

3. Minimize credit utilization

Credit utilization is the ratio of how much a business is borrowing to the amount it is allowed to borrow. The lower this ratio is, the better a business’s credit score will be. You can decrease your credit utilization by opening more lines of credit and borrowing against them as little as possible. Making small payments throughout the month on a business credit card, as opposed to paying in one lump sum at the end of the month can also improve credit utilization.

4. Pay all your bills on time

The most crucial aspect of a business’s credit score is the consistency and timeliness of its payments to creditors. This goes beyond just credit card and net 30 payments. To have a good business credit score, a business must also pay its rent, utilities, and other expenses on time. A single late payment can significantly hurt a business’s score. As long as your business consistently pays its bills on time, its credit score and borrowing power will improve as the years pass.

Business credit scores FAQ

Do small businesses have their own credit score?

Every registered small business has a business credit score. However, for new small businesses, that credit score may be significantly affected by the credit scores of the business owners.

What is a good credit score for a business?

According to Experian, one of the three major business credit bureaus in the US, a score of 80 and above is considered a low credit risk to lenders, a score of 50 to 79 is medium risk, and 1 to 49 is high risk.

What is an acceptable business credit score?

According to the US Small Business Administration, small business owners should aim for a score of 75 or higher. This is considered a strong business credit score and is the minimum needed to qualify for most small business loans.

How do I check my business credit score?

You can check your score by requesting a business credit report from one of the three major business credit bureaus. Dun & Bradstreet and Equifax offer free business credit reports while Experian charges a fee.