Improve Your Business Score with These 5 Steps
Maintaining a good business credit is important for several reasons: Firstly, if you’re trying to obtain a small business loan to expand your business, lenders will offer you better interest rates which will increase your profit margins and give you an advantage over your competitors.
Secondly, business credit protects your personal funds and assets thereby making you less liable for business losses or bankruptcies. And thirdly, a great business score shows on the company’s credit report which gives investors, customers and partners an insight on its performance.
Bad business or personal credit is the number one reason why more than 45% of small business loans are rejected by lenders – and even if you do get a loan despite poor credit, it is most likely to have high interest rates which can create loss instead of profit for your company.
But the implications of poor business credit can go beyond the ability to get loans with favorable interest rates. It can also result in high insurance premiums and unfavorable payment terms from suppliers.
Now that you know how business credit score can impact the future of your company, you’re probably eager to know what you can do to improve it. Here are five steps you can take to build an impressive business credit.
Update Business Profile with All Three Credit Bureaus
Unlike your personal credit score which only relies on Fair Isaac Corp.’s standards for producing a FICO score, business credit is determined by several different credit bureaus such as Experian, Dun & Bradstreet and Equifax.
These bureaus collect data and calculate credit scores differently and you never know which bureau your supplier, lender or customer reports to, which is why it is important to keep your company’s information up-to-date with all three of these credit bureaus. All three bureaus allow business owners to create a basic profile of their company including financial statements in order to get the accurate picture of the credit score.
Use Trade Credit to Improve Business Credit Score
If you use third-party suppliers to purchase inventory for your business, this could help improve your business credit score. Check with the vendors you use to see if they offer trade credit which lets businesses order supplies and materials without having to pay for them instantly.
Suppliers have different credit terms and depending on what type of accounts-payable relationship you have with them, they may require you to pay within a few days or weeks of making a purchase.
Your supplier will report your payments to the credit bureaus which will affect your credit score depending on how punctual you were in paying your suppliers. Set as many trade lines as you can in order to boost your score, even with small vendors who bring water or other supplies for your office.
Pay Creditors on Time
The biggest factor that determines your business credit score, no matter which bureau you use, is your payment history with creditors. It is important that you pay your bills on time, or even early, in order to prevent your credit score from suffering. Dun & Bradstreet prefers businesses with a long credit history and timely payments.
That, in addition with your personal credit score, can boost your chances of establishing perfect business credit. Credit utilization is also an important factor considered by bureaus before crunching out a credit score so make sure to spend within the credit card limit.
Only Choose Lenders That Are Able to Establish a Credit Line
The longer your credit history, the better the chances of improving your business credit score – as long as you make all payments on time. As we saw earlier, credit lines established with vendors add to your credit history and improve your score. However, not all lenders provide the accounts payable feature to their clients, especially those with a bad credit history. Do your research and find lenders that offer good credit terms and are willing to lend to small businesses with bad credit history in order to improve your credit score.
Keep All Records Clean
When filing business information and reports with credit bureau, you will also need to provide all public records such as lawsuits, bankruptcies and judgements. All these negative records have a bad effect on your credit score and can make suppliers hesitant to do business with you.
Judgments are court rulings for debt lawsuits against a business which remain on your credit score for seven years. Bankruptcies, on the other hand, can haunt your credit score for 10 years.
More in Business
How Drake Outsold His Mentors After Learning Rap from a Prisoner
To many Drake is the popular music icon whose song ‘Hotline Blink’ became the subject of many hilarious memes, but what fans...September 13, 2019
The Median U.S. Household’s Income Rises to Above $61,000 Annually
A positive note for the American economy. According to a report released by the U.S. Census on Wednesday last week, middle-class...September 13, 2019
Pink Lost the Grammy But Her Kids Consoled Her With This Heartwarming Gift
There is no better consolation for an entertainer than winning a Grammy Award. Every star wants to hold that prestigious award in their...September 13, 2019
The Mindset that Helped Tennis Hall-of-Famer Andy Roddick Grow His Net Worth
The importance of saving and investing cannot be stressed enough by experts. Financial gurus have often advised setting aside a portion of your money for...September 13, 2019
Are The Presleys Broke? Elvis’ Ex-Wife Priscilla is Selling This Property to Save Her Daughter
With how popular the late Elvis Presley remains to this day, most people would think that his immediate family will all...September 13, 2019
Rihanna Is Now America’s Richest Female Musician–Here’s Why She Has No Plans to Stop Working Despite Having Millions
While Rihanna seems to have taken a break from making music, her last album being released last 2016, the Barbadian born...September 13, 2019
Stressed out? 9 Simple Tricks to Eliminate Depression and Heal your Inflammation Today!
It’s a given that you’ll feel blue at some point in your life. Whether its work or health-related, all that stress...September 13, 2019
Top Cities to Retire For Only $37,000 a Year
Want to retire comfortably without draining your pocket? A renowned retirement coach named Edd Staton says you might want to think...September 13, 2019
The Added Benefits of Selecting a Long-term Mortgage Fix for Your Financial Freedom
For decades, two-year mortgage setups have been quite the norm for homeowners and real-estate investors alike. However, with the rise in...September 13, 2019