Your business credit score is important. When it’s good, it will be easier to secure more credit for your business in the future. When it’s not so good, you may find that the cost of credit is high…or that you have difficulty getting credit at all.
A business credit score is like a personal credit score with a larger size and scale. The worse a business credit score is, the more risk a creditor will take on by offering credit to your company. This risk often translates to high interest rates which make the cost of borrowing money very expensive. Getting turned down for credit is another potential pitfall of having a poor business credit score.
With all of this in mind, let’s talk about the most practical and effective ways to establish a good business credit score.
Basic Facts to Consider
A credit score for a business offers a quick run-through of information which is found within credit reports for your company. In particular, a credit score for your business will assess the ability that your company has to make timely payments. Data utilized in order to determine business credit scores includes private and public data which is visible to lenders, suppliers and vendors.
There is a cluster of four primary business credit scores and there may be up to eight of these types of scores. They range numerically from zero to one hundred. The higher the number, the better. A low business credit score is not going to help you achieve your business goals. It’s going to make the task of getting essential credit, such as a business line of credit or business credit card, quite a bit harder.
The group of primary credit scores come from Equifax, Experian, Dun & Bradstreet and FICO SBSS.
How to Improve Business Credit Scores
We talked earlier about how a business credit score is like a larger-scale version of a personal credit score. The same techniques that individuals use to improve their credit ratings may be used to develop stronger credit scores for businesses. The first strategy is to make timely payments from this point in time onward. Late payments are going to hurt your credit rating. If you’ve been guilty of making late payments, it’s time to get organized and pay bills on time, even if you’re only able to pay the minimum.
It’s possible that creditors will report you when you pay late. To be really safe, consider making payments before the due date arrives.
Also, keeping your usage of credit limited will be wise, as will keeping levels of debt low. When you use credit a lot and have higher debt levels, it’s going to damage your credit rating. If you’ve relied too much on credit in the past and owe a lot of money via a range of accounts with lenders. you may want to restructure the debt and pay it down. You need to start building better business habits.
Occasionally, most businesses do need loans or a couple of loans in order to stay afloat and/or grow. However, as a general rule, debt of the revolving type should be kept at a low level. When debt levels are low, credit utilization will go down and this is good for building a higher credit score.
Keep On Top Of Things
The next tip is to know your company’s credit scores. It’s vital to stay on top of things by checking your credit reports for your company on a regular basis. If there are inaccuracies or errors, you may be able to dispute the incorrect credit entries and have them removed. If you need help checking credit reports and/or filing disputes with credit bureaus, you should hire a credit repair expert, like Lexington Law Firm, to help you out. When incorrect entries do get removed, credit scores get higher.
Another tip is to use some credit. Just don’t overdo it. Have a few accounts and then make payments on balances owed for these accounts right on time. Also, don’t jettison credit accounts just because you’ve managed to pay them off. These credit accounts should be kept open, even if you rarely use them. If you close a lot of accounts, even if they’re all paid up, it may hurt your business credit score.
The goal of making these changes is sending a message that your business is now less of a credit risk that it used to be. So, why not try our helpful tips today?