Business owners and leaders should be mindful of their credit score. Just like personal credit, your business credit score helps banks and lenders assess your creditworthiness and figure out how likely you are to completely pay off a loan. If you fail to maintain a good business credit score, you may find it extremely difficult to borrow money from a financial institution. In fact, an NSBA study reported that 20% of small business loans have been denied due to bad business credit scores.
If you’re a business owner who is struggling to keep your business on the good side of credit bureaus, you’re in luck. Below, we’ve listed four tips that can help you boost your business credit score.
Regularly check your credit report
The first step to improving your business credit score is keeping a close eye on it. By doing this, it allows you to check if your business credit score is falling and if it does, you can immediately dispute any errors or inquiries. You can do this by regularly checking your business credit report from the major credit reporting companies such as Experian, Equifax, or Dun & Bradstreet. However, do remember that accessing your business credit report comes with a small fee. If you want to observe any changes to your business credit score, SmallBizTrends advises that you check out free resources like Creditsafe and Nav.com.
Do not miss any payments
It goes without saying that you should never miss any debt or invoice payments. Failing to pay on time can really damage your credit score, whether you owe a huge financial institution or your supplier. In fact, a late payment marker will stay on your credit profile for six years. So be sure to pay your debts as early as you can. Aside from tainting your business credit profile, paying early can also show lenders how great you are at handling your debts and cash flow.
Open another account
You may find your business credit score at a dismal number if you don’t use any credit products. For this reason, you should open one or two credit accounts in your business’ name. For one, you can choose to open a corporate credit card. Reliable financial resource AskMoney discusses in their guides how you should do your due diligence before choosing a credit card provider. They also state that you should use your card wisely for business expenses. If you’re careful with your expenses it can provide your lenders with insights into your history and show them that you are capable of managing debt.
Keep your credit utilization at a minimum
You shouldn’t max out your corporate credit just because you can. In order to improve your business credit score, you should be mindful of your credit utilization ratio, which is your used revolving credit divided by the amount of credit available to you. Experts advise that you should keep this ration under 15% to prevent your business credit score from slipping. You can also talk to your credit provider and ask to increase your credit limit to quickly decrease your credit utilization ratio.
By following the tips we’ve listed above, you can recover your business credit score and find it easier to get approved for a small business loan. Here on Working Capital Review, we have a ton of other business and financial resources that can help your organization succeed.