How to Improve Your Business Credit Score
Your business credit score is crucial to your company’s success. Lenders use it to determine your credit worthiness, which is largely based on your bill payment history. The higher this number the better chance you have of obtaining financial vehicles such as low-interest commercial loans and insurance coverage. If your score is lower than you like, there are steps you can take to improve it.
Creditors report your payment history to companies such as Dunn and Bradstreet, Experian and Equifax. These companies assign credit scores based on the information they receive. There are instances where the data listed on your report is not correct. These inaccuracies can have a negative impact on your rating. Monitor your report on a regular basis. Whenever you notice any mistakes, correct them as soon as possible.
You may prefer using your own personal finances to launch your startup. Perhaps the idea of taking on debt is a bit scary. While that’s understandable, borrowing money from lenders can work out in your favor. Obtaining a loan or using a company credit card, creates a financial paper trail that can help you establish your company’s credit worthiness. Additionally, it helps you access more capital down the road.
As stated above, opening accounts and using credit is important. Likewise, it’s also important to avoid taking on too much debt. Owing money to too many lenders can have a negative impact on your business credit. At some point, you may need small loans to cover expenses or grow your company, so the best approach is to keep the revolving debt low. A low debt load keeps your rating high.
Paying bills late is a surefire way of damaging business credit. In most cases, late or missed payments are reported to the credit bureaus. With that said, maintaining a healthy score means paying your creditors on time.
A common mistake business owners make is closing accounts. You paid the account full. Perhaps you no longer need it. Maybe you’re curbing the temptation to spend money. Regardless of the reason why you may want to shut down an account, it’s best to keep it open even if you don’t use it. When you close an account, it lowers you rating which reduces your chances of securing additional financing later on.
These simple tips go a long way to helping you improve your business credit score. Higher ratings can help you qualify for the kind of financial capital that can turn your startup into a thriving enterprise.