What is a business credit score?

What is a business credit score?

There are many aspects of a business that make it necessary to take on significant debt, often much larger than individuals might take on. For instance, a company may need money for equipment or operations or a vehicle for business-related travel which may require a loan.

When offering loans to businesses, lenders will seek to verify that the organisation is capable of servicing the debt and making timely repayments. One way of doing this is by checking the business credit score, which helps lenders make informed decisions about lending to a company.

What's a good business credit score?

Depending on the business credit reporting agency, a company’s business credit score ranges from 0 to 1,200. According to the credit rating agency Equifax, business credit scores above 833 are considered excellent. There are some instances in which your business may not have a credit score at all.

One example of not having a business credit score is if you haven’t registered your business name with the Australian Securities and Investments Commission (ASIC). Another example is if neither the business nor the owners or directors have had any credit enquiries registered with any reporting agency in the past five years.

In general, a higher business credit score gives lenders the confidence that your business will not default on, or fail to repay, the loan or line of credit. Other organisations engaging in financial transactions with your company may prefer to access your business credit score rating or report. Such information usually includes details on the different factors that affect your business credit score. If you’re concerned about your business’s credit rating, accessing this report will help you see how you can improve your rating.

How to build your business credit score

Several factors can affect your company’s business credit score. These factors can include how long you’ve been operating your registered business and the kind of financial transactions conducted during this time. A long and rich history of moderate borrowings and timely repayments may ensure that your company has a high business credit score.

A few basic checks can help keep your organisation’s business credit score at a respectable level, including:

  • Verifying that the credit reporting agency has accurate information, especially about the financial performance of your business
  • Setting up and sticking to payment terms with suppliers and contractors
  • Keeping debts in check and ensuring that you repay them all as per the loan terms
  • Keeping personal debts and business debts separate

Some of the incidents your company should avoid to build a high business credit score include:

  • Continued cash flow issues
  • Multiple loan applications within a short duration
  • Legal disputes or action against your company
  • Vendors reporting a payment default
  • Any of the company’s directors filing for bankruptcy
  • Directors getting disqualified for reasons of business impropriety

You should remember if any of the directors or owners of the business have been insolvent in the past seven years, the company may not have a credit score at all.

How to check your business credit score for free

You’ll likely need to reach out directly to a credit reporting agency to check your business credit score, and they may charge you for the report. Some websites may let you check your business credit score online for free if your business is a smaller-sized one. To get this information, you’ll need to provide your Australian Business Number (ABN), how long you’ve been in business and your annual revenue. 

Does a business credit card affect your personal credit score?

Getting a credit card, and accumulating debt on it can impact the business credit score of the company without impacting the personal credit score of any of the owners, directors, or managers of the company. A business credit card may be offered by a bank which also transacts with the business in other ways. Such as by hosting business transaction account or lending business finance. 

The services that a bank will offer depends on the financial profile and creditworthiness of the business, and the business credit score is an essential factor. Not having a business credit score may prevent your company from being issued a credit card. 

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Learn more about credit score

Do landlords check credit scores?

For landlords, credit score checks can tell if a potential tenant has a history of delayed or missed rent payments. Usually, a poor record of repayments is likely to result in a low credit score. Also, your credit history may include information from tenancy databases such as the number of times landlords have inquired about your credit score. 

If there are too many inquiries within a short time, landlords may conclude that you have had issues renting in the past.  However, there is no rule as to when landlords check your credit score. Some might check every time they receive a tenant’s application. In some cases, landlords may even rent out their property to tenants with a poor credit history if they can submit additional documents or sufficiently explain their situation and how they are trying to address it.

 What credit score do landlords look for?

Landlords may look for issues relating to repayment rather than a specific credit score, although a low credit score probably suggests that you’ve had repayment issues. In general, if your credit score is categorised good, very good, or excellent - which corresponds to an Equifax credit score range of 622 - 1,200, landlords may not scrutinise your credit history too closely.

Can I check my credit score without a driver's license?

In Australia, your driver’s license is the preferred identification document for credit reporting agencies. This means you may not be able to confirm your identity using another document, such as a proof-of-age card. You may have genuine reasons like concerns over identity theft for not wanting to provide your driver’s license number. Unfortunately, most credit bureaus won’t allow people to check their credit score without a driver’s license. 

If you don’t have a driver’s license, there’s a good chance you haven’t applied for credit in the past and don’t have a credit score at all. In case you are concerned about identity theft, credit reporting agencies can offer you paid packages that include insurance against identity theft. Such packages may also include monthly credit score checks or alerts whenever your score is updated.