5 Quick Fixes to Improve Your Business Credit

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How risky are you and your business? Your business credit score is one of the first numbers lenders will use to gauge your ability to manage your finances and pay off any potential loans they grant you. If your business credit score is low, you may be seen as too big of a risk, so you may want to improve your numbers before trying to convince a lender that you’re good for the money.

The proof is in the numbers, my friend.

Business Credit Requirements and Credit Scores

You’re probably familiar with the ins and outs of your personal credit, but what about your business credit? In some ways, the two are very similar. Business creditworthiness is gauged on some of the following: 

  • How often do you pay your bills?

  • What’s your credit history like?

  • How much credit do you have available, and how much of that have you used? (This is your debt-to-credit ratio)

Business credit scores are on a 0 to 100 scale, which differs from the much higher numbers you’re used to seeing on your personal credit report. Most lenders prefer scores of 75 and higher. If you’ve already requested your business credit score and aren’t happy with what you see, you can (and should!) take steps now to improve it. Check them out:

Business Credit Fix #1: Business Credit Error Checking

Get up close and personal with your business credit report and check it for errors. You can report any errors you find to the relevant credit bureau and formally file a dispute to request they be corrected. The credit bureau gets 30 days from the date you file to verify your correction(s) and make the update(s) to your business credit file.

To do: Get a copy of your business credit report from one of the major credit reporting bureaus like Experian or Equifax, and check it for errors. 

Business Credit Fix #2: Proactive Business Credit Reporting

Your business credit score rises along with the number of vendors reporting a positive credit history for your business. Since vendors don’t have to report business credit transactions, they often don’t bother to take the time. But if you proactively and specifically ask your business vendors to make positive transaction reports (assuming, of course, you’ve earned them), you’ll get the benefit of a better business credit score.

Learn MoreHow To Get an SBA 7(a) Loan with Bad Credit?

To do: Reach out to the vendors who you have a great rapport with today, and ask them for a positive transaction report. 

Business Credit Fix #3: Reduce Your Business Debt

Most credit bureaus recommend that you keep your business debt below 20 to 30 percent of your total business credit limit, and you get bonus points if you do. If you’ve been borrowing too much of what you’re allowed, it’s a red flag that your business is struggling and might not be strong enough to handle additional an loan. Paying off some of your business debt before you apply to lenders can help your chances of being approved. They’ll be relieved to see you have more breathing room should a minor crisis arise (such as business expenses increasing or profits taking a dip).

To do: Make, and implement, a plan for paying down your business debt to below 30 percent of your credit limit. 

Business Credit Fix #4: Pay Business Debts on Time

Lenders look at patterns to determine the likelihood of your success. If they can see proof that you’re already consistently and promptly making payments on other business debt, they’re more likely to trust that you’ll do the same with anything they lend.  If you haven’t been timely or consistent, you may want to talk to your existing lenders to see if they’re willing to remove any late fees or withdraw any negative reports on your business credit report. Especially if your lapses have been few and recent, it’s definitely worth a try.

To do: Contact current lenders with which you have a good relationship to see if they’ll withdraw negative reports from your business credit report, especially if your slip-ups are few. 

Business Credit Fix #5: Get More Business Credit

The more business credit you’ve got, the more data potential lenders can access to determine their risk. And as discussed above, the more credit you’ve got that isn’t being used, the better your business credit score will be. If you’ve barely got any credit, future lenders can’t accurately determine how creditworthy you are. So opening business accounts, even if you don’t end up using them all, can be a good thing: Open accounts Improve lender relationships. If you’ve already got a business loan, you can ask stores to open credit cards in your business’ name. The greater your debt availability, the greater your business credit score will become.   

To do: If you don’t have business credit, open a business credit card or small loan.

Building business credit is a great first step to getting the additional funding you need. Contact us with your questions about small business lending -- it’s free and we’re happy to help you on your way to your dream!


 

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