Business Credit Report And Credit Score – Understanding The Difference

When it comes to applying for a loan, people get confused between the terms business credit report and business credit score most often. Fact of the matter is, the very task of obtaining a loan can become a little overwhelming for most people. What with all the formalities and paperwork involved and the many technical aspects to consider, confusions are expected to be abound. The proper differentiation between credit report and credit score is simply one of them.

Let us look into the matter further and understand each of these components.

Credit report

There are many credit reporting agencies out there who will prepare a report in your name that will form part of your credit file. This report will hold a detailed record of your credit history, stemming from an analysis of the many transactions you have initiated on your end in the past years. The application can include your monthly credit card bills, monthly phone or utility bills, applications made for a credit card and any defaulted payments that have been more than sixty days pending.

Credit Score

Based on the information generated in your credit report, you are actually assigned a numeric value which is a representation of our credit health in the recent condition. Reporting agencies actually follow a standardised credit score model which is a complex mathematical formula applied to your credit report. Each factor represented in the report is assigned some weightage and your performance scores you points. These weights are then aggregated and analysed to generate a unique score, which determines what your credit score is.

Business credit score

This system takes on a whole new meaning in the corporate scenario. Credit agencies analyse a number of factors related to your business including your payment record, payment frequency, number of debts incurred in the past, current outstanding debts, credit cards held by the business owner and his credit worth as well as certain credit charge-offs. The majority of scores usually range from 300 on the poor end to 850 on the top end. Interestingly, the Veda credit scoring system begins at 200 and finishes at 1,200.

Utility?

Business credit reports and business credit scores offer an amazing insight to lenders about your current financial health and past dealings. They help them in analysing whether you are loan-worthy or not. The future of your loan application depends on your credit score as most banks and financial institutions will simply reject a bad credit score. There are, however, agencies that offer loans to businesses with bad credit ratings but they charge a higher interest rate on them to mitigate the risk they are taking. In short, a lot of your business’ future profitability depends upon the credit score you get in your report. You must always endeavour to keep your payments in line and avoid any defaults if you are to stand any chance of making a higher score.

For more information about business credit score and reports, visit WeKnowData.com.

ABOUT THE AUTHOR

Steve Adams is an expert in credit analysis and offers his tips and advice to all those looking for a way to improve their business credit scores through his articles and blogs. He recommends WeKnowData.com as the best website to trust for credible information on these topics.