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BusinessFinance

Credit Scores: Expectations vs. Reality

As a business owner, you know how important your business and personal credit scores are. When you get a large purchase order, a high score can mean having access to affordable working capital to easily fulfil it. A high score can mean having access to a loan to invest in new technologies, instead of becoming an antiquated dinosaur with slowly deteriorating profit margins.

Business credit scores have traditionally taken into account various factors. These factors include the payment history, how much access you have to credit, how much your credit is currently being used, how many tradelines you have open, as well as any liens or court judgements.

This information is reported to the credit bureaus from various creditors, including banks, suppliers, and credit card companies.

The modern business credit score, however, is emerging as distinct from these traditional business credit scores. The modern business credit score starts with the information that the traditional credit score uses, and then enhances it with an entire new universe of data. Data that the business itself provides. This new data set is often referred to as “alternative data.”

Many business owners, however, expect that by making all payments on time, their business credit scores will be perfect when it comes time to apply for that loan. So they focus on timely payments and may not bother even checking credit reports. Yes, a strong history of on-time payments is paramount to having a great credit score.

However, the reality is that even if you have a timely payment history, you have to get your hands on copies of your credit reports and credit scores on a regular basis, even before you need them for a loan application.

Here are three reasons why your expected credit score may be different in reality:

  • Errors and Mistakes

There may be erroneous information on your credit report lowering your credit score. As the exact calculation of your credit score relies on many factors, items that may seem unimportant may actually be of consequence, such as industry codes. So even if an error seems like not a big deal. Go ahead and resolve it through the credit agency’s dispute resolution processes. Other errors might not seem so small – like loans that have not been marked as paid off even when they have been. Definitely resolve these immediately. 

  • Fraudulent Activity

Sometimes bad actors and fraudulent activity cause an otherwise good credit score to be lower. Some signs of fraud include: a line of credit that your business never applied for, incorrect personal information or social security/employment identify numbers, past due payments where none are expected, and hard inquiries that you never made. These are obviously very serious problems to have, and you may never learn about them if you do not check your credit reports.

  • Surprising Credit Calculations

It is obvious to most business owners that paying bills on time is essential to having healthy credit scores. However, there are less obvious elements that are just as important. Your credit report will often give short reasons why the credit score may be lower.

Some of these reasons could include:

  1. Insufficient credit history. If your business has not been using credit products for very long, your business simply may not have a sufficient credit history to get a high credit score. Do not worry, CreditPush can help you build a credit history even starting from zero.
  2. Insufficient credit lines. If the total limit of all of your business’s credit lines combined is not much. This will also negatively impact your credit score. Similarly, not having enough separate credit lines can also be an issue. It can be surprising to learn that not borrowing enough money can lower your credit score!
  3. Liens. Sometimes, a lien could be put against your company without you even knowing about it. A lien is a legal claim by a creditor to property, and depending on the details, can be a significant red flag to a potential creditor! Reviewing your credit reports can help you identify any outstanding liens so that they can be resolved asap. 

When you can check your credit score for free using CreditPush, there is every reason to find out whether the reality of your Credit Score matches your expectations. Whether or not your credit score holds any nasty surprises, have no fear – we will help you improve it, step-by-step. When the time comes and you need an infusion of capital into your business. We will even identify and apply to new credit products on your behalf. 

When you work with CreditPush to improve your business credit scores, you have the opportunity to connect 150+ apps. These integrations include CRM, social media, accounting, payroll, and marketing apps. This helps credit bureaus get a robust understanding of your credit profile, and as a result, your credit score could go up!

It makes sense to be concerned about whether providing this extra data to credit bureaus could also negatively impact your scores. When providing this data through CreditPush, you can rest assured that your credit scores NEVER go down.

In addition to potentially increasing your credit score, by integrating your favorite business apps with CreditPush. You will access powerful actionable insights to enable better business decisions. You will be able to analyze the impact of events, like a new loan or new employee, on your business’s financial performance. Additionally, you will get alerted about issues ahead of time, so that you can mitigate risks and avoid losses.

Has your business taken advantage of the opportunity to modernize and increase its credit score by providing alternative data? With CreditPush, you have the opportunity to do this for free. Sign up to be a beta tester for CreditPush today. Plus you get a bunch of other awesome financial tools to make your business a success. Sound like a great deal?

CreditPush has everything you need for the financial success of your small business.
Improve your business’s financial health, boost your business credit score, access quality funding and more – all in one platform. Designed for small businesses (<25 employees, <$5 mln revenues).

Vlad Hordiychuk

Vlad Hordiychuk is the Product Owner of CreditPush. He has held leadership and managerial positions in fintech, information technologies, and global supply chain ventures. He is trilingual, has a business degree from Ivan Franko University, and has Google digital marketing certification. He spends his free time walking his dog Space and ballroom dancing.

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