Many businesses neglect their business credit rating as they are singularly focused on day-to-day operations. Running and maintaining a successful business is increasingly difficult – from dealing with customers and vendors to marketing and advertising. There is a very high chance, no matter the size of your business, that you will at some point rely on credit to launch or run your business. Your business credit rating is the essential factor that determines whether or not you will be able to obtain this insurgence of credit. Considering recent economic circumstances, it is more difficult than ever to obtain credit, so a good business credit rating is essential to help your business grow and thrive.
What’s a Business Credit Score?
A business credit score is a measure of your businesses creditworthiness and is similar to your personal credit score. Simply put, it is the extent to which your business is considered suitable to receive credit based on your reliability of paying back money in the past. Credit reporting agencies use various methods to calculate creditworthiness—including your number of trade experiences, outstanding balances, payment history, and more—and that number ranges from zero to 100. The closer your business is to 100 you are, the better your credit score.
Why Improve Your Business Credit Score?
Your business credit score is the number one factor that influences the financing your business can secure. The higher your credit score, the more money you can borrow. A low credit score could prevent you from borrowing money entirely. If you have a poor credit score, you don’t have to panic because there are various ways you can improve your business credit score. We have compiled a comprehensive guide of tips to help you improve your business credit score.
Check your credit report
Check your business credit report regularly and verify that the information is accurate and up-to-date. This is an effective way to keep on track and accountable to your business credit goals. Your credit report will contain your score as well as other essential information like the size of your business and any negative criteria like mis payments or payment disputes.
Develop a Credit History for the Business
To improve your business credit score you need to establish a reliable credit history for your business. Next you need to establish a credit history for your business. A simple step to generating a credit history is opening up a business credit card. A credit card is far easier than securing a six-figure business loan to begin with. Think of your business credit card as the tool used for laying your credit foundation and establishing a positive payment history.
Another way to build up your credit history is establishing a positive record with companies you do business with, such as suppliers and leasing companies. Provided they report the information to credit agencies, your history with them counts toward your credit score.
Strive to Use Credit
Once you get the business credit card, use it. Credit usage is a game that has to be played. Use your business credit card and ensure that you play by the rules and pay back on time. Another way to use credit is to establish a credit account if you consistently work with certain suppliers over and over again. If you continue your good payment relationship this will help increase the number of positive payments to your file.
Pay Bills on Time
The number one rule of playing the credit game is paying promptly. Being bad at paying your bills on time will damage your credit score. Making late payments on your bills will negatively impact your credit history and score, especially if your creditor chooses to report you to credit bureaus. Historical payment behaviour with previous creditors plays a major role in determining your business credit score. It goes without saying that paying your bills before the due date is not only a good business habit that will improve your scores but will also be beneficial in maintaining good relationships with your creditors.
Don’t Neglect Your Personal Credit Score
If you are a small business, creditors will assess both the business’s credit score but also personal credit scores. This is because many small businesses are closely aligned with the owner’s financial situation. There are a variety of avenues to check your personal credit score and how to improve it which you can find here.
Choose Creditors Strategically
To build up and maintain your credit history, it is essential that your creditors report to credit bureaus. When building business credit, ask your potential creditor whether they report to a credit bureau before you take out a business loan. Banks typically report to credit bureaus, but if you have bad credit, you probably won’t qualify for a bank loan. Many online business lenders which are more willing to lend to bad-credit borrowers also report to credit bureaus.
Your business also needs choose creditors that can help you achieve your business’s strategic goals — not just meet your near-term money needs. It is important to consider the level of personal service available and the ability of your creditor to understand your financing reasons and make recommendations to achieve your goals