FICO® Scores and Entrepreneurship

Understanding FICO® Scores

A FICO® Score is the most commonly used credit score, which is a 3-digit representation of credit history. A personal FICO® Score goes as low as 300 and as high as 850. The higher the score, the better. Lenders consider your FICO® Score when deciding whether to extend credit and when setting interest rates. There are also other areas where your FICO® Score may be considered, such as when renting a new space.

A FICO® Score falls into the following categories…

• 300-579: Poor
• 580-669: Fair
• 670-739: Good
• 740-799: Very Good
• 800-850: Exceptional

The FICO® Score x Entrepreneur Connection

There are two main reasons entrepreneurs need to understand and build a strong FICO® Score. First, reaching a Good, Very Good, or Exceptional FICO® Score requires consistent, wise credit choices. That means making payments on time, not borrowing too much at once, and other smart financial decisions to support good credit usage. Building a strong FICO® Score also builds habits to manage money wisely—for yourself and for your business.

Second, a high FICO® Score improves your access to the capital needed to build your business. Whether you’re upgrading equipment, opening a storefront, or expanding marketing, it’s likely that you’ll need to take out a loan or open a line of credit to support your business. A strong credit score shows potential lenders that you’re a responsible borrower and makes them more likely to lend to you.

Personal Score vs Business Score

As your business grows, you’ll likely build a dedicated credit score for your business. FICO® Small Business Scoring Service℠, for instance, scores businesses on a scale of 0 to 300. This measures how well your business entity borrows, repays, and manages credit. Until then, your personal FICO® Score is used. Even when you have an independent business score, it’s possible your personal score will also be considered in lending decisions.

Building a high FICO® Score is vital for every entrepreneur. Even as a student, you can set yourself up for success. Talk to your parents about potentially becoming an authorized user on one of their credit accounts. This establishes credit history, which can give you a leg-up when you’re old enough to open your own line of credit (usually when you’re 18). The best place to start, though, is building your personal financial skills. This prepares you to successfully handle credit when the time comes.