Building Credit as a Freight Broker: Why It Matters and How to Improve It

The Importance of Credit for Freight Brokers and How to Build It

In the freight industry, credit is more than just a number—it’s a key indicator of trust and reliability that carriers and lenders rely on to assess brokers. This can create challenges for newly established brokerages that haven’t yet had the chance to build their credit.

This is especially true for those who are transitioning from an agency or adding a brokerage division to an existing fleet. You may have been in business for a while, but if you haven’t previously operated as a broker, you might not have a freight broker credit score attached to your new brokerage. This can make it difficult to secure new carriers, find financing, and build your reputation.

Credit plays a vital role in nearly every aspect of a brokerage’s operations. Brokers with strong credit have an easier time securing loans, attracting carriers willing to transport their loads, and receiving favorable rates from lenders.

For newly formed brokerages, it may feel like a chicken-and-egg situation: you need credit to establish trust with carriers and lenders, but you need payment history and financing to build that credit. So, what’s a new brokerage to do?

In this article, we’ll explore the importance of freight broker credit, how to establish it even as a brand-new brokerage, what factors impact your score, and much more.

What is Freight Broker Credit?

Freight broker credit is similar to personal credit scores in concept—it reflects your business’s financial stability and ability to pay
debts. A higher rating indicates that your brokerage is more reputable and creditworthy, while a lower rating suggests financial risk.

There are a few key differences between personal credit and freight broker credit. First, the scale is different: while personal credit scores range from 300 to 850, freight broker credit scores typically use a 0-100 scale. Additionally, freight broker credit scores are focused more on the financial health of your business rather than your personal payment history.

What Factors Impact Your Credit Score?

The biggest factor influencing a freight broker’s credit score is payment timeliness. Late or missed payments have a significant impact on your score and can quickly drag it down.

Broker-specific credit bureaus, such as Ansonia, also track your "days-to-pay," which is the average time it takes you to pay carriers. Monitoring this metric closely and improving it when possible is crucial for maintaining solid credit.

Other factors include:

- Credit history and outstanding debt

- Trade relationships and references

- The number of credit inquiries

- Your brokerage’s business history

 
Why is a FreightBroker’s Credit Score Important?

Establishing credit is essential for growing your brokerage. Your credit score helps you:

- Secure financing: Lenders are more likely to provide loans to brokers with good credit, and at better rates.

- Work with carriers: Many carriers perform credit checks on brokers to determine whether they’ll get paid on time. Brokers with good credit
have an easier time securing loads.

- Obtain a surety bond: Your credit score affects your ability to secure the bonds required for licensing and compliance.

Most importantly, a strong credit score signals trustworthiness to carriers, lenders, and customers. Brokers with poor credit often struggle to build relationships and may lose business to competitors with better credit.

Why You Need Good Credit as a Freight Broker

Brokers might think their credit score isn’t crucial or that their current score is "good enough." However, if you plan on growing
your brokerage, focusing on credit is essential for several reasons:

- Securing loads: Brokers with higher credit scores can secure loads faster and with less hassle. Carriers want assurance that they’ll get paid, and they are more cautious about working with brokers with poor or no credit.

- Better lending options: Lenders are more willing to work with brokers who have strong credit. Brokers with lower credit scores may face higher interest rates, which can restrict cash flow and limit growth.

- Increased negotiating power: A proven track record and strong credit can give brokers more leverage in negotiations with factoring
companies, lenders, and carriers.

- Winning new business: A good credit score helps build a reputation for reliability, attracting top-tier carriers and opening doors to new opportunities.

What is Considered a Good Credit Score for Freight Brokers?

Freight broker credit scores typically fall into one of three categories: high risk, medium risk, and low risk.

- Low risk (87-100): Brokers with scores in this range are considered the most reputable and least likely to default or miss payments. They have access to the best carriers and can often demand higher fees for their services.

- Medium risk (70-86): Brokers in this range are still considered reliable but may have less leverage with financial institutions and
carriers.

- High risk (0-69): Brokers with low scores may struggle to find lending opportunities and carriers. New brokers may fall into this
category due to limited credit history, not necessarily because of poor practices.

How to Check Your Freight Broker Credit Score

Monitoring your credit score is a critical step in maintaining and improving your brokerage’s financial health. You can request credit reports from credit bureaus that specialize in business and freight brokers, such as:

- Ansonia: A primary credit bureau for freight brokers that uses a 0-100 scale.

- Dun & Bradstreet: Offers credit scores for businesses and provides unique DUNS numbers that assess creditworthiness.

- Experian: Provides credit reports that include a business credit score and a financial stability risk rating.

- Equifax: Assesses payment history, credit risk, and business failure risk.

It’s also a good idea to use credit monitoring services to keep track of changes in your score over time.

How to Improve Your Freight Broker Credit Score

If your credit score isn’t where you’d like it to be, don’t worry—there are steps you can take to improve it:

- Make payments on time: Timely payments are the most important factor in determining your credit score.

- Manage cash flow: Maintain sufficient cash flow to pay carriers promptly and avoid overcommitting to more loads than you can handle.

- Reduce debt: Lowering your debt-to-income ratio and avoiding frequent credit inquiries will help improve your score.

- Run audits: Regularly review and verify paperwork to avoid errors that could delay payments.

Conclusion

Whether you’re starting a new brokerage or expanding an existing one, building credit is essential to your success. A solid credit score helps you secure financing, attract reliable carriers, and gain a competitive edge. By following these steps, you’ll be on your way to establishing and maintaining strong credit, positioning your brokerage for long-term growth and success.