A business credit score is a summary of your credit report into a single number. This summary number represents the credit history of your business. It features details such as how long your business has been around and the number of credit inquiries of your business.
Simply put, your business credit score shows how healthy the finances of your business are, and it’s potential. It helps to determine how your business should be viewed by banks, other businesses, and lenders.
Having a good credit score in your business can help you get loans easily, win contracts faster, and get better terms with vendors. So, how do you improve or ensure your business credit score is up to par? Below are essential tips to help you out.
1. Always Analyze Your Business Credit Score Report
Your credit report plays a significant role in your business. That is why you always need to ensure that you carefully analyze it. You can get your business credit report from various credit reporting companies, although the reports are not always free. You have to pay a specified amount of money in order to get them.
However, the report is worth the effort because it will help you clearly understand what you are working with. What’s more, you’ll have the correct information, and if you find any errors, you can raise a dispute to correct the report.
2. Avoid Paying Bills Late
Paying your bills late is another thing that can affect your business credit score. It is a proven fact that late payments can negatively affect your credit score. That means even if you use other means to try and keep your credit score in check, if you have the habit of paying your bills late, you are bound to have a low credit score.
Therefore, this is something that you need to keep a keen eye on and ensure that you try as much as possible to avoid it. We would recommend setting relevant alerts on your phone to help you pay bills on time.
3. Build Solid Credit Accounts with Suppliers
Suppliers are quite crucial for your business. Suppose you don’t have reliable suppliers or haven’t established a good relationship with them. In that case, there is a high chance that your business might end up failing in the near future. Also, suppliers are important for helping your business keep running. They also play a major role in your credit score.
If you have reliable suppliers that you’ve been working with for a long time, you can try to build solid credit accounts with them. When you do that, it will help to increase your business positive payments, thereby improving your credit score.
4. Raise Disputes for Any Misappropriate Errors in Your Business Credit Score Report
We mentioned earlier that it is essential always to check your credit report to ascertain everything is accurate. That is important because if you happen to find any misappropriate information report in your credit score, you can raise a dispute.
You can work with credit reporting agencies and credit card companies to help you remove any negative feedback placed in your credit file by mistake. Always ensure that everything being reported in your credit file is accurate to avoid having a bad report that you are not responsible for.
5. Reduce the Ratio of Credit Utilization
Most credit reporting agencies look at your credit ratio to determine your business credit score. This is also referred to as the credit that has been used compared to the available amount of credit.
Therefore, it is recommended to make sure that your credit score stays below 15% if you want to be on the safe side. Some of the ways to help you maintain that percentage include paying off your balances, increasing your credit limit, and reducing credit card spending.
6. Acquire a Business Line of Credit Early
Acquiring a business line of credit as early as possible before you even need it can help build an ideal business credit score. That means diligently paying off your balances. When you consistently and promptly repay your balances, it will help to show that you’re a trustworthy borrower.
Having a line of credit will also benefit your business operations. It may help you when you encounter emergency cases or even contingencies that require urgent attention and money. Therefore, it will assist you with short-term expenses like purchasing inventory and paying your suppliers.
7. Avoid New Loans or Business Credit Cards
It is highly beneficial having fewer loans in your business. Also, you need to ensure that you can handle all the credit cards and loans in your business before you consider adding new ones. A lot of banks and lenders prefer loaning money to companies with fewer obligations.
When you apply for new credit cards or loans in your business, it usually results in various credit inquiries, which negatively impact your business credit report. Therefore, you need to avoid new loans or credit cards in your business as much as possible.
8. Avoid Maxing Out Your Credit Card Balance
It is highly recommended to avoid maxing out your credit card balance. This is mainly because the higher your credit card balance, the lower your credit score. To know how much you are using, you can divide your credit card balance by the total limits on your card.
If you want to be on the safe side, ensure that you keep the balance of your credit card at about 30% or even less. You should also note that your consumer credit score plays a huge role in your business’s credit decisions.
9. Ensure Your Credit File Has Positive Payment Experiences
One way of having a good credit score in your business is to ensure that the credit file has positive payment experiences. You can add your supplier’s references to your business’s credit file manually to help it have a good credit score.
10. Ensure Negative Accounts Are Removed from Your Credit Report
If you happen to have debts in your business that went to collections, strive to solve that issue for the better. In most cases, these debts tend to show up in your credit history and may provide a negative view of your business. That is why it is crucial to consider removing the credit accounts to improve your credit score positively.
Improving your business credit score is a fundamental factor that every business owner needs to consider. There are many other ways to do this, but the ones we’ve discussed in this post are quite essential and helpful to consider.