About Personal and Business Credit Scores
A personal credit score is a three-digit number calculated from your credit report to gauge your reliability as a borrower. It can be used to predict whether you’ll pay back your loans or pay debts on time, and it also helps to determine whether you are generally a good risk for lender.[i] Credit scores are also used to decide if you are a bankruptcy risk.
Credit scores have several factors including:
– The number and types of accounts you have
– Your available credit
– Your length of credit history and payment history
– The number of recent inquiries about your credit, e.g. credit reports requested
Everyone is entitled to one free credit report per year. Visit Annual Credit Report to request one. You will receive three reports, one from each of the credit reporting agencies: TransUnion, Equifax, and Experian.
Since credit scores affect whether a lender will loan to you and the interest rate, it is very important to check credit scores regularly. Incorrect information, old open accounts, divorce, and businesses can negatively impact credit scores. Credit scores can also determine if you are a hirable candidate for certain positions, especially in the banking and financial industry.
Businesses have credit scores too, often provided by Paydex, a division of Dun and Bradstreet. A Paydex score can range from 0 to 100, with 80 and above “golden.” Businesses with a score of 80 meet creditors’ terms — that is, they pay on time. Anything above that means they pay bills before they arrive or during the early payment discount period. A business credit score of 70 means you’re paying your bill 15 days late; with a score of 50 you’re 30 days late.[ii]
Like individuals, a higher credit score is better and usually results in better business loan terms, from interest rates to length of time to repay. The opposite is also true. To minimize the cost of borrowing, pay attention to the Paydex score for your business and correct errors if any are found.
Unlike personal credit, business credit scores (Paydex scores) look at only one thing: whether a business makes payments on time and meets creditors’ payment terms.
By Dion D. Shaw
Dion D. Shaw is the founder and owner of Homepreneurs
Homepreneurs. New Day. New Opportunity.
Homepreneurs does not endorse nor have any relationships with any of the services listed. Homepreneurs receives no compensation or consideration for its suggestions. Homepreneurs strongly urges all interested parties to conduct research and accepts no responsibility for any losses incurred.
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