Improving your business credit score can be easy and offer many long-term benefits.
With a better credit score, you can secure larger loans that have better interest rates. Our advice will help you improve your financial situation and set you up for financial success.
Here are four straightforward ways you can raise your business credit score. Many of these tips will boost your score now and have many long-term benefits on your financial wellness.
1. Check and Manage Your Credit Records
There are three main credit bureaus that manage your business credit history and compute the corresponding credit score: Dunn & Bradstreet, Equifax and Experian.
Sometimes the bureaus may have incorrect information that affects your score, including:
- Public records (liens, debts that went to collections)
- Old addresses
- Hard credit inquiries
- Unpaid accounts
Even minor errors can greatly affect your score and get in the way of securing a loan.
Be sure to check with the main three bureaus and correct errors when present. You’ll also want to note that some of these business credit reports are not free, unlike personal credit reports, so refer to them sparingly.
To fix these inaccuracies, you must report them to each bureau separately. Getting them wiped off your records can raise your business credit score very quickly.
2. Establish Good Credit Relationships
Your financial partners can help you improve your credit score.
When you secure lines of credit from suppliers or a loan from a bank, you affect your credit history. Paying off these lines of credit in a timely fashion can bolster your credit score. Be sure to pay off your debts as you accrue them to avoid any negative effects on your score.
In other words, be responsible with credit payments to all partners and lenders. You’ll find developing positive relationships with financiers will benefit your credit score.
3. Maintain A Low Credit-to-Debt Ratio
Using credit to support your business is good for your credit score, but using too much can damage it.
Generally, it’s recommended that you keep the debt-to-credit ratio below 30 percent.
If you have $5,000 in available credit, that means your debts should stay under $1,500. Keeping this debt low is one sure way to boost your score over time.
Other ways to improve your credit ratio and your business credit score include:
- Paying off balances regularly
- Asking for a credit increase from the bank
- Decreasing card spending
- Opening another credit account
4. Separate Personal and Business Finances
If you run your business using your personal accounts, you run the risk of damaging your credit score.
While many businesses run using this model, using your personal finances for your business can be messy and often lead to damaging your credit score. Many business owners will use their personal lines of credit as their business lines of credit when their current loan allotment won’t cover the expenses. Try to avoid this model.
As we mentioned before, maxing out your debt reflects poorly on your credit score (for business and personal accounts). Using personal credit can also get in the way of building a business credit history, having a negative impact on your score.
The credit bureaus track your business purchases and information, but they can’t do that if you’re using personal accounts. To build positive credit history, apply for a business credit card and create business accounts with a bank.
If you’re running a startup or your business is struggling, you might have a hard time finding a way to get a business account and card. It may be in your best interest to shop around with other credit unions and secure a loan through other lenders like Paypal.
Your Business can Achieve a Great Credit Score
A high business credit score is possible for any business that follows the right credit practices. With our tips, you can raise your business’s credit score and afford better financing.
In summary:
- Have current and accurate records with the credit bureaus
- Work with suppliers and lenders that report to bureaus
- Manually report your good credit relationships
- Use your credit card but keep debt low (pay debt on time, all the time)
- Separate business finances from personal accounts
Explore Our Array of Helpful Articles
For advice on your personal credit score or to learn how to apply for a business loan, check out our other articles. We also offer practical tips and thoughtful guidance on everything from running a business to investing in today’s markets.
