Life becomes more difficult for entrepreneurs when they start managing funds for a new venture. Although an entrepreneur may have a good business plan, banks and financial institutions do not give a warm welcome to new entrants. However, a good business credit score can help.
Credit Score Factors
What is the business credit score and how do companies improve it? The business credit score displays how a company has handled its finances in the past. The most important factors affecting a business credit score are payment history and liabilities. The length of the credit history, the types of credit used and the lines of new credit also affect a business credit score. The last two factors account for 10% of the credit score apiece while the length of the credit history accounts for 15%. Payment history accounts for the most important portion at 35%, while the amount owed is 30%.
These factors affecting a credit score can be classified even further into different segments. For example, the amount owed can be split up into the following categories.
1.Amounts owed in general: This includes everything below.
2.Amounts owed on Accounts: This includes everything owed within all the accounts
3.Amount owed on specific types of accounts: This breaks up the accounts into workable segments.
4.Number of accounts with balances: This is only for the accounts that have positive balances
5.Lack of a specific type of balance: This is only for the accounts that have negative balances
6.Proportion of credit lines used: This measures the amount of credit the company is using.
7.Proportion of installment loan amounts still owed: This includes all outstanding debts.
The following items make up the length of credit history.
1. Time elapsed since account opened.
2. Time elapsed since specific type of account opened.
3. Time elapsed since account any account activity.
4. How many times people have enquired about the credit report is also an important indication of a company