Whether you’re an established business or a start-up, establishing a strong business credit score is a great step for growing your business. Business credit scores are much like personal credit scores, they measure the creditworthiness of your business. Business credit scores range from 0 (lowest) to 100 (highest); a score between 65 and 100 is considered good to great. Improving your business credit score should be at the top of your list.
Here is a sneak peek at the 4 ways to improve your business credit score.
- Separate Your Personal and Business Credit
- Check Your Credit Report
- Establish Credit with Your Suppliers
- Manage Your Accounts
Why Improve Your Business Credit Score?
There are many reasons why you should maintain or continue to improve your business credit score. Most importantly, if you’re an established business seeking funding, lenders can use business credit scores, along with personal credit scores to evaluate loan eligibility.
A strong business credit score can help increase the chances of credit approval when personal credit scores aren’t as strong. By having a strong business credit score you may be eligible for better payment and discount terms with vendors and suppliers.
How to Improve Your Business Credit Score?
1. Separate Your Personal and Business Credit Score
You can start by opening a separate bank account for your business. By doing so, you can establish your business’ credit history properly. The next step is to apply for a business card, instead of using your personal credit cards for business related purchases. Using your personal credit cards doesn’t help build a stronger business credit profile, which could impact your chance to obtain financing when you need it.
2. Check Your Credit Report
Even minor mistakes can have a big impact. Ensuring accuracy in your business credit report is vital – in most cases, you can correct these errors by contacting the credit bureaus and providing evidence that the information is inaccurate. The three main credit bureaus who report on business credit – Dun & Bradstreet, Experian, and Equifax – all report their own scores, and these scores can vary. To learn more about how these scores are calculated, read this article.
3. Establish Credit with Your Suppliers
If you have regular suppliers and vendors, you should think about establishing trade accounts with them. Trade credit is when you receive goods from a supplier or vendor without having to make upfront payments. This can help increase your creditworthiness in the industry. If your supplier runs out of merchandise you need, they might connect you with another supplier. Keep in mind; you must stay on top of agreements. A good payment history will reflect in your credit.
4. Manage Your Accounts
Now that you have separated your personal and business credit, checked your credit report, and established trade accounts, you need to manage your accounts. You can do this by forming three simple habits.
- Pay your bills early or on time. Late payments can impact your credit score greatly, stay on top of your payments and your credit score will reflect that.
- Pay off debt. You can start by breaking up your debt into smaller chunks, making the repayment process more manageable.
- Keep revolving credit balances low. One of the things credit bureaus look at when determining credit scores is the ratio of credit used in relation to the amount of credit available. You should aim to keep that ratio under 15%.
With these tips, establishing or improving your business credit score can be straightforward and manageable. Having challenged credit or lack of established business credit doesn’t have to stop you from growing your business. There are financing companies who look beyond the credit score and understand your business needs.
Eager to get started? Find out your monthly payment estimate using a financing calculator. All you have to do is select your equipment type, cost, and term length. Try it out! You could have that new or used piece of equipment that will help grow your business in no time.