credit scores

A credit score is more than a number in business—it’s a reputation. Whether you’re a first-time entrepreneur or a seasoned owner expanding your operations, understanding credit scores is one of the quiet fundamentals of getting funded. It’s not just about meeting lender criteria; it’s about demonstrating that you’re financially trustworthy.

And when it comes to what you need for a business loan, that trust can tip the scales.

Credit scores may seem like cold, calculated digits on a screen. But to lenders, they read like a history book—a record of your financial habits, risk-taking behavior, and reliability under pressure. The better your story looks, the more favorable your financing path becomes.

This piece unpacks the real role credit scores play in the business loan process—how they’re built, how they’re judged, and how to position yourself for a better shot at funding.

 

The Story Behind a Credit Score

Before a lender sees your business plan or hears your pitch, they’ll pull your credit score. But where does that number even come from?

A credit score is essentially a snapshot of your financial history, boiled down into a number between 300 and 850. That number helps lenders gauge how likely you are to repay what you borrow. It draws from your credit report, which tracks your history with loans, credit cards, and payment patterns.

Three major credit bureaus—Experian, Equifax, and TransUnion—collect and report this data. They’re the keepers of your financial track record. And while you can’t always control what they gather, you can influence how that data reflects on you.

Breaking Down the Credit Score Formula

Think of your credit score like a pie chart, divided into five slices:

  • Payment History (35%)
    The most important factor. Consistently paying bills on time is your best ally.

  • Credit Utilization (30%)
    This looks at how much of your available credit you’re using. Keeping it under 30% of your limit is often considered financially healthy.

  • Length of Credit History (15%)
    The longer your accounts have been open—and in good standing—the better.

  • New Credit Inquiries (10%)
    Opening multiple new accounts in a short time can raise red flags. Space them out when possible.

  • Credit Mix (10%)
    A combination of installment loans (like auto or student loans) and revolving credit (like credit cards) reflects balanced borrowing behavior.

Each person’s score is unique, shaped by a different combination of these ingredients. There’s no one-size-fits-all answer, but there is a roadmap for improvement.

 

Two Models, One Purpose: FICO vs. VantageScore

When lenders assess what you need for a business loan, they usually rely on one of two scoring models: FICO and VantageScore.

FICO, developed in the late 1980s, has long been the standard in lending. Most banks, credit unions, and traditional lenders still use it to assess credit risk.

VantageScore, a newer model the three credit bureaus created, uses many of the same data points but weighs them slightly differently. For example, it may give more credit to newer borrowers who haven’t built years of history yet.

Both models range from 300 to 850; in both cases, the higher, the better. But here’s the kicker—most lenders won’t tell you which score they’re using. That’s why keeping tabs on both isn’t a bad idea.

How Your Score Impacts Business Loan Options

Whether you’re applying for a traditional bank loan, an SBA loan, or something quicker like a line of credit, your credit score is going to influence:

  • Loan approval likelihood

  • Interest rate offers

  • Repayment terms

  • How much you’re eligible to borrow

A solid score—typically 680 or above—is often needed for a business loan with competitive terms. But if you’re under that, don’t panic. Alternative lenders, including fintech platforms, are more flexible, especially if your business has strong revenue or a compelling growth plan.

That said, a great credit score can mean the difference between borrowing at 7% interest or 18%. Over the life of a loan, that adds up.

Personal vs. Business Credit: What’s the Difference?

One common misconception is that your personal and business credit are always separate. Most small business owners rely on personal credit to secure financing, especially if the business is new and lacks its own credit file.

This means your own financial habits—credit card usage, student loans, late payments—can directly affect your business’s ability to secure funding.

As your business grows, you can establish and build a business credit score by doing things like:

  • Opening a business credit card

  • Setting up accounts with vendors who report to credit bureaus

  • Incorporating or forming an LLC

  • Getting a D-U-N-S Number (used by Dun & Bradstreet)

Still, in many cases, lenders will check both scores, so keeping your personal credit in good shape remains essential.

What You Can Do to Improve Your Credit Score Before Applying

If you’re wondering what you need for a business loan and your score isn’t quite where it should be, don’t worry—credit health is fixable. Here are a few realistic, practical moves:

  • Pay down existing debt. Especially high-balance credit cards. It boosts your credit utilization ratio instantly.

  • Set up autopay or reminders. Late payments are the single most damaging factor. A simple system helps avoid them.

  • Don’t open new accounts too quickly. Each hard inquiry can temporarily ding your score.

  • Dispute any errors on your credit report. Mistakes happen. Use free tools like AnnualCreditReport.com to check.

  • Keep older accounts open. Even if you don’t use them often, long-standing credit contributes positively.

Credit scores don’t change overnight. However, consistent effort over three to six months can often yield noticeable improvements, just in time for your next loan application.

Credit Score Red Flags That Can Stall Business Loan Approval

Certain credit behaviors can make lenders hesitant, even if your business is profitable. Watch out for:

  • Recent bankruptcies or foreclosures

  • Frequent late payments

  • High credit utilization across multiple accounts

  • Too many loan applications in a short span

If you’re dealing with any of these issues, it’s not the end of the road. But it may mean starting with a smaller loan or working with alternative lenders until your credit profile strengthens.

A Note on SBA Loans and Credit Requirements

Thanks to their low rates and long terms, SBA loans are a popular choice for small business owners. But they come with stricter credit requirements.

While the SBA doesn’t set a minimum credit score, most lenders want to see at least 650 to 680, with 700+ ideal. They’ll look at your full credit history, not just your score, so responsible behavior patterns matter as much as the number itself.

If an SBA loan is part of your long-term strategy, maintaining strong credit today puts you in a much better position.

Let Your Credit Work for You

Your credit score is a quiet but powerful force behind almost every financial move you make as a business owner. It can open doors to funding when the timing’s right—or keep them shut when you need a boost.

So, what do you really need for a business loan? A solid plan, a lender that aligns with your growth stage, and a credit profile that reflects consistency, responsibility, and financial foresight.

And if your numbers aren’t quite where you want them to be, that doesn’t mean your business goals are out of reach.

At ZING Funding, we take a different approach. We go beyond the credit score to understand your bigger picture—your business journey, goals, and potential. Whether you’re just starting out or gearing up for expansion, we’ve helped business owners across industries secure financing that fits.

Let’s figure it out together. Reach out to ZING Funding today and see how we can help you succeed with small business financing that’s smart, strategic, and built around your real-world needs.

 

FAQs

What is a credit score, and why is it important for obtaining a business loan?

A credit score is a numerical expression based on a level analysis of a person’s credit files, representing the creditworthiness of an individual. For business loans, lenders use this score to evaluate the risk of lending money to the borrower, affecting the loan terms and interest rates.

How can I find out my business credit score?

You can find out your business credit score by requesting it from major business credit bureaus such as Equifax, Experian, or Dun & Bradstreet. Some bureaus may charge a fee for access, but knowing your score is crucial for managing your business finances effectively.

What credit score range is typically required for a business loan?

Lenders often look for a credit score of 680 or higher for more favorable loan terms. However, requirements can vary significantly between lenders, with some accepting lower scores but possibly offering less favorable terms or higher interest rates.

How can I improve my credit score to qualify for a business loan?

Improving your credit score involves paying bills on time, reducing debt levels, and avoiding new credit inquiries. Consistently managing your credit responsibly over time helps improve your score, making it easier to qualify for business loans.

Does my personal credit score affect my ability to get a business loan?

Yes, your personal credit score can significantly impact your ability to get a business loan, especially for small businesses or startups without a long credit history. Lenders may use your personal credit history as a measure of creditworthiness for your business.