What is a Good Business Credit Score and How to Improve Yours

What is a Good Business Credit Score and How to Improve Yours

When you start looking for money, you’ll hear a lot about business credit scores and how crucial they are, but what exactly constitutes a “good” credit score and how can you obtain one?

Knowing your business credit score is crucial since it’s likely that the majority of Small to Medium Enterprises (SME’s) will want outside capital at some point in their existence. It has been said that up to 93% of business owners haven’t really examined their business credit score, though.

You can make better financial decisions and have easier access to financing if you are aware of your credit score and how it is calculated. Here is a brief explanation of credit scores, what constitutes a good score, and how to raise your own:

A business credit score: What is it?

A businesses credit score (also known as credit rating) is a summation of an analysis of its credit report. Your credit report includes details on the credit history of your business, such as:

• The total number of credit enquiries your business has received.

• Duration of operation – Lenders may view a newer business as being a greater risk than one that has been in existence for some time.

• Information about the business, including its name as a legal entity, its directors, its organisational structure, etc.

• Information about commercial credit, such as defaults, verdicts, and court writs.

• Information on the director, such as bankruptcy, defaults, and court rulings.

A business credit score does not include the same amount of personal data that is used to determine an individual credit score.

Knowing your credit score gives you an overview of how lenders, banks, and other companies see your business and its creditworthiness. A good business credit score can help you negotiate better trade terms with suppliers, get lower interest rates from banks and lenders, and in some circumstances, even help you land contracts with big businesses or the government.

Now, what exactly is a “Good” credit score?

Most business owners are aware that a good credit score is one that is high. But what does a “good” credit score mean? How soon after that should you begin to worry that your credit is “bad”?

The major credit reference company in Australia, Veda (now Equifax), offers a thorough system of many “levels” for credit scoring. Their ratings range from Below Average to Excellent on a scale of 0 to 1,200:


Although having a credit score in the “Average” or “Good” level for your business is entirely acceptable, it is true that the higher your credit score is, the better. You should only start becoming concerned once your score drops to the bottom end of the range (we’re talking much below 400). Building a strong credit history takes time, and it frequently takes businesses some time to do so. It will take time for newer enterprises to build a business credit history, so this is particularly true for them.

Non-bank lenders, in contrast to many conventional bank lenders, don’t just look at credit scores. While it is a factor in their lending criteria, they also take accounting information and business bank records into account in addition to credit ratings to help them comprehend a business’s borrowing capacity. As a result, they can evaluate loan applications more quickly and accurately since they have a greater picture of the entire financial health and borrowing capacity of a business.

How to Improve a Business Credit Rating

Sadly, there are no ‘quick fixes’ you can use to raise your score, and establishing a strong credit history takes time. The key to increasing your business credit score is consistency, which means completing all your usual financial activities on schedule rather than going above and above to boost your score.

There are numerous factors that can both favourably and negatively impact your credit score, but the following are the most important to watch out for to start increasing your score:

         Paying all your bills on time, if possible, or even early. The most crucial point is that late payments are one of the main reasons that can significantly lower your score.

         Avoid requesting too many new business credit cards or loans. Numerous credit enquiries may result from this, which will reflect poorly on your report.

         Paying your ATO debt on time. It’s a big one.

·         Opening a credit card for a business. For many reasons, using a separate credit account for business and personal purchases is a smart idea. It can also help you establish your businesses credit. Lack of debt isn’t always a good thing; building a credit history while carrying modest debt is beneficial.

Although Positive Credit Reporting (PCR) or Comprehensive Credit Reporting (CCR) is now available in Australia, many institutions continue to employ Negative Credit Reporting. This basically means that evaluations are based on any negative marks that an applicant’s credit history may have, so avoiding these marks is crucial to a high score.

Maintaining good credit is an ongoing effort, and knowing exactly what will affect your score will help you keep your business’s finances in order. Considering this, you ought to obtain and examine your credit report once every 12 months. Check your credit file for any inaccuracies or inaccurate information and have it repaired as soon as possible because they can negatively affect both your credit score and the ability of your company to obtain financing.


Finally, it’s critical to keep in mind that conducting numerous credit checks on your business may have a bad effect on your credit score.