Small Businesses Need Good Business and Personal Credit Scores When Seeking Loans
OAK RIDGE, N.J., October 4, 2012 — Lakeland Bank encourages small business owners to educate themselves on the importance of establishing and maintaining good business and personal credit. Business credit reports and credit scores differ from a business owner’s personal credit reports and credit scores. As the majority of lenders reference business and personal credit scores when making lending decisions, it’s important to acquire, build and maintain both types of credit.
Like personal credit scores, business credit scores provide a quick view of risk potential based on where the score falls on the credit scale. Personal credit scoresrange from 300 to 850 with a score above 700 considered very good. Business credit scores, on the other hand, range on a scale from 0 to 100 with 75 or more considered an excellent rating.
To establish a business credit score and develop a positive commercial credit history,begin byfollowing these simple steps:
1. Apply for a free D-U-N-S number from the largest business rating bureau Dun & Bradstreet (D&B). It’s the fastest way to get added to the D&B business database.
2. Apply for a business line of credit with a vendor using your federal tax identification number (FIN) and D-U-N-S number.
3. Make payments on time.
4. Request that your existing vendors report your account history to business credit bureaus, as it is voluntary for them to do so. Many office supply companies such as Uline.com, NEBS.com and Viking.com report account history automatically.
Information about business credit transactions is gathered by business credit bureaus to create your business credit report using your business name, address and FIN. Three of the most popular business credit bureaus are:
Lenders use this report to get a current, objective picture of how a business manages its financial obligations. The business credit report shows similar information as what is found in a personal credit report, such as comprehensive financial information and credit risk factors, but it is specific to a business's debt repayment and public records. Business credit reports will also include information about bankruptcies, judgments or tax liens as well as demographic information such as business size, owners and officers. In many cases, lenders will rely on your business credit report to determine how much credit they are willing to grant.
Why Personal Credit Matters
If you're a sole proprietor or a business owner with fewer than 20 employees, your personal and business credit scores are closely linked in the eyes of banks and other lenders. Because of this, it’s important to take steps to protect both. You should monitor, evaluate and protect your credit standing just as you would protect any other business or personal assets.You will benefit greatly from having a good credit score and from having solid credit history. Lakeland Bank, an FDIC insured bankand lender in Oak Ridge, NJ, looks closely at a business owner's personalcredit score because the small business owner is the business. If your credit history is clean with reasonable levels of credit granted, the chances are that you will handle your business obligations in the same manner.
Take the following steps to improve or maintain an excellent personal credit rating:
1. Order a free credit report annually from each of the three reporting agencies - Equifax, Experian and TransUnion – from www.annualcreditreport.com.
2. Thoroughly review your credit report for any errors and dispute any discrepancies.
3. Maintain good long-standing relationships with creditors.
4. Always pay your bills on time and pay down balances on credit cards.
5. Keep your credit utilization ratio low—our utilization ratio is the amount of your total debit divided by your total available credit.
About Lakeland Bank
Lakeland Bancorp, the holding company for Lakeland Bank, has an asset base of approximately $2.9 billion and 46 offices spanning six northern New Jersey counties: Bergen, Essex, Morris, Passaic, Sussex and Warren. Lakeland Bank offers an extensive array of consumer and commercial products and services, including online banking, localized commercial lending teams and 24-hour-or-less turnaround on consumer loan applications. For more information about the full line of products and services, visit its website at LakelandBank.com