What is a Business Credit Score?
Just like your personal credit score, a business credit score measures the creditworthiness of your business entity. In Canada, the two main credit bureaus that track business credit are Equifax Canada and TransUnion Canada. These scores determine your eligibility for loans, supplier trade credit, and interest rates.
How Business Credit is Calculated
Unlike personal credit scores (which range from 300 to 900), business credit reports use different index scales depending on the bureau:
- Payment Performance: Historically paying bills on time is the single largest factor.
- Credit Utilization: The percentage of available credit you use. Keeping utilization below 30% is ideal.
- Company Demographics: Years in operation, size, and industry risk classification.
- Public Records: Liens, judgments, or bankruptcies filed against the corporation.
Steps to Build Your Business Credit in Canada
- Incorporate Your Business: Establishing a separate legal entity (LLC or Corporation) is necessary to separate your business and personal credit.
- Get a Business Credit Card: Use a dedicated corporate credit card for company expenses and pay the balance in full every month.
- Establish Trade Lines with Suppliers: Ask suppliers to report your on-time payments to Equifax and TransUnion.
- Avoid Delinquent Accounts: Even a single 30-day late payment can drop your business credit score significantly.
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