How business credit score works, and is it different from an individual's score?

24-Oct-2018 written by : FSI-Team

How business credit score works

CCR, Company Credit Report should be taken as seriously as the normal credit report. Just as an individual has the credit report, the business too will have to credit report. let’s take detailed information on how the business credit score works and what are the similarities and the differences between business credit score and individual score.

Credit score for business is no such complicated or different thing than normal individual credit score.

Payment history: The total credit repayment which is done profoundly is 35% of the whole score.

Amount Owed: The total amount that is taken as credits by credit cards or credits in the form of loans is the second major part of the business score and that is 30% of overall score.

Credit mix: A healthy mix of secured and unsecured credit makes the score more liable and serious. Again, similar to individual score this has 10% value. But here, the difference is more and more unsecured line of credits and the score will show major dips compared to what is an individual score.

Length of credit history: In company credit score, this is an important factor. Even though while calculating this may have only 10% weightage, but the credibility of business depends a lot on this. How long have been the business credit accounts open and how have they managed shows a lot about responsible business account head which is the mirror that shows the seriousness towards the credit.

New credit: again, as similar to the individual score, new credit at a basic interval is important to maintain a good score. However, it should be taken care of that not many new credits are applied in the short span giving a credit hungry behavior feel. The 10%, of course, that is remaining is for this.

What will the business credit score contain?

Just like the personal information in the individual CIBIL report, there are few pieces of information that are to be given/updated in company credit scores.

The registration number of business or the tac registration information Company profile: Name, Contact details (Address, Contact Number, Email ID etc), DIN number For the first six months after the credit has been approved the score will be established It will have the credit history from the first credit that was applied to the current one that is applied and is on, accounts that have been closed or still on etc The details of the credit taken by the business along with if there has been guaranteed for any of the loans that the business may have indulged with.

Applying for a business credit report

A business credit report is applied online going to the individual bureau website. CIBIL, Experian, Equifax, and Highmark are the bureaus which offer the Company Credit Report (CCR). They are charged unlike one free report that an individual gets every year according to the rule passed by RBI (Reserve Bank of India) in 2016. The person may apply to go to the bureau website and pay the amount that is charged for the report and the report will be sent on email. Information that had to be entered are:

  • Company details
  • Legal Constitution
  • Address of the firm
  • Contact number and official email id of the firm
  • Documents (KYC)
  • CIN, TIN, PAN/TAN number

Why maintain the business credit score?

The personal loans may work as the requirement of funds for any business. But, when the amount is very huge in case of big companies where the credits are in multiple of crores, personal loan definitely can’t work. One has to apply for a business loan and get it approved. So, maintaining the business CIBIL score becomes equally important in such a scenario.

Here, similar rules are applicable to maintain a decent score:

  • Making payment off all the credit dues on or before the due date
  • not to apply for too many loans. Maintain a gap of minimum 10-12 months before the new loan application
  • Just because the business is eligible to get a credit or the loan, do not apply for one.
  • Maintain a healthy credit mix with a secured and unsecured line of credit with the fixed and revolving line of credit.
  • Do not close the oldest accounts

This must have given a fair idea about the business credit score and the difference or the similarities between it and individual score along with the business line of credit and personal loans. The major rules are the pointers are all the same, the only difference is, that the numbers that are seen are huge in the case of businesses!



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