Why Should I Check Others' Business Credit Score?

BCR_quotesocial4.pngSmall business is tough whether you are the vendor or the client. Both parties have only their best interest and goals in mind and, therefore, there is always room for risk. Building a business relationship is imperative in this case, but first, as the client, you need to decide whether or not you want to move forward with a vendor before you spend more time on them.

A business credit score can quickly assist you with this important decision. As an asset to help businesses acquire the capital they need to grow, the business credit score is a telltale sign for other companies looking to hire them. It answers these questions:

  • Does this vendor have the ability to grow as my business grows?
  • Does this vendor have financial stability?
  • Is this vendor able to fulfill their commitment to our business currently?
  • Is this vendor worth the risk?

But, what type of business credit score is sufficient? Everyone is familiar with personal credit and the healthy score range, but a business credit score is different. Personal credit is measured using the FICO score, with a score value ranging from 300 to 850. Higher values show lower risk to lenders. Business credit is measured differently. Each credit reporting agency has a proprietary method of coming up with this score. The score ranges from 0 to 100, and again the higher value shows lower risk.

A business credit score takes several things into consideration, and it is important for you to analyze each of these elements when making a decision.

  • Current payment status – balances, number of relationships, percent delinquent
  • Utilization – the amount of credit used compared to available
  • Derogatory items – collections, liens, bankruptcy judgments
  • Payment history behavior – positive or delinquent trends
  • Demographic information – age and type of business, the number of employees, etc.
  • Trade data – how a business interacts with its vendors

Avoid future surprises by checking the business credit score of any vendor, prospect or potential customer you deal with on a regular basis. It can only help you in making better decisions for your business. Remember, your credit character is the same as your character. The same rings true with business credit.

 

A Vendor Verification Report quickly assesses the financial viability of prospective vendors and the continued viability of your existing suppliers. It also includes Fraud Flags and one free year of Monitoring Alerts. Read more about this report.