Are you part of this group? Did you even know that your business had a credit score?
If you didn’t know, don’t feel bad. Clearly, you’re in the majority.
Now that you do know, though, it’s time to get to work learning about your business credit score and raising it up.
Read on to learn everything you need to know about your business credit report and credit score.
Your Business Credit Report: The Basics
If you’ve never taken a look at your business credit report, now is the time to do so.
There are lots of online credit reporting services like Nav, Credit.net, and CreditSafe that will provide you with a free copy of your business credit report.
Your business credit report says a lot about your financial instincts as a business person.
It tells lenders whether you have a history of paying back loans and paying your bills on time. It also shows them whether you understand the importance of money and good money management in business.
The report will contain information about all the accounts related to your business. This includes your business checking and savings account, as well as any accounts you have with creditors.
Remember, your business credit report will include only accounts that are open under your business’s name, not your personal accounts.
Factors that Affect Your Business Credit Score
Your business credit score usually ranges from zero to 100 (or zero to 300 in the case of FICO’s small business credit scores). The closer you are to 100 (or 300), the better.
There are a lot of factors that go into determining your business credit score, including the following:
- The number of years your business has been in operation
- The number of lines of credit for which you’ve applied in the last nine months
- The number of new lines of credit you’ve opened and the number of credit lines you’ve used in the last six months
- Collections amounts and tax liens from the last seven years
- Your payment history and the number of payments made on time
It’s important to note that your business credit score will often vary depending on the specific credit bureau with which you’re working.
This is because business credit score algorithms aren’t standardized in the same way that personal credit score algorithms are.
Even though your score might not be consistent across all bureaus, there shouldn’t be too much of a deviation.
How to Improve Your Business Credit Score
Once you take a look at your business credit report and learn your business credit score, you may or may not be too happy with what you see.
A low business credit score can certainly be discouraging. The good news, though, is that there are a lot of steps you can take to raise it up.
The following are some effective strategies you can use to improve your business credit score:
Pay Your Bills on Time
One of the best things you can do when you’re trying to raise your business credit score is to make sure you pay your bills on time.
If you can show lenders that you make payments on time (or even early) every month, they’re going to be more inclined to approve your loan applications in the future.
Lower Your Utilization
Do your best to lower your credit utilization ratio, too. This refers to the amount of money you’re charging each month relative the total amount of credit you have available.
You can lower your utilization by using the following tactics:
- Pay off balances in full each month
- Increase your credit limit
- Decrease credit card usage
You can also lower your utilization by paying bills multiple times per month.
Establish Accounts with Suppliers
This is a very helpful strategy for businesses looking to build credit.
If you work with specific suppliers on a regular basis, consider establishing a credit account with them.
This helps to increase the number of positive payments on your business credit report.
Check for Errors
Don’t just check the credit score on your business credit report.
Read through it carefully and check for any errors. This could be errors regarding your business’s name or location or errors related to your accounts.
By correcting those errors, you could see a significant improvement in your credit score.
Borrow from the Right Lenders
When you’re trying to build credit and are applying for business loans, look for lenders who report to credit bureaus.
This will help you ensure that your positive loan payments are benefiting your business and making it easier for you to get loans in the future.
Apply for a Business Credit Card
A business credit card is a great tool to help you raise your business credit score (as long as you’re making the payments on time each month and aren’t overusing it).
According to the information on this page, there are lots of credit cards available even to people who have less-than-stellar credit scores or no credit at all.
Look into one of these if you’re having a hard time qualifying for a traditional credit card.
Keep an Eye on Your Report
Finally, make sure you continue to check on your business credit report on a regular basis.
This will help you make sure your score is moving in the direction you want it to, and you’ll be able to catch any errors right away.
Get More Business Finance Advice Today
As you can see, there’s a lot to keep in mind when it comes to your business credit report and credit score.
If you remember these guidelines, though, you’ll have a much easier time raising your business’s credit score and keeping it high.
It’ll take some hard work initially, but you’ll be glad you did the work when your business qualifies for better loans and financing opportunities.
Do you want to learn more about business finances? If so, we’ve got lots of helpful articles available to you.
Start by checking out this article on the importance of investment management services in the business world today.