Having an excellent credit score is not only important for consumers, but for small businesses as well. When you are planning on starting a business, or are currently operating a one, your credit score is a crucial element to your success. Having a good credit score impacts nearly every financial aspect of your business, including being approved for a business loan, having lower interest rates, obtaining access to capital, and establishing a reputation for being a responsible business owner with impeccable credit. If your credit score has recently dropped, there are ways to improve it, along with having access to the many benefits and advantages of a good credit score.
1) Analyze your current credit report. Request a credit report from each of the three main credit bureaus, including Transunion, Equifax, and Experian. Look closely at each report and make sure all of the information is correct. Pay close attention to the negative category and make sure there are no errors or mistakes that might hint toward identity theft or fraud. If items on your credit report are listed as current but are over seven years old, file a dispute with the credit bureau to have it removed.
2) Limit the number of business credit cards. Opening new lines of credit is not the answer to improve your small business credit score. Your credit score is impacted by more than just the amount of money you owe; applying for additional credit cards can have a negative impact on your score and lower it rather than improving it. Avoid having too many credit cards under your business name to avoid a negative mark on your credit report.
3) Separate business and personal credit. Keep your business and personal credit lines separate to avoid complications from one of these areas being impacted by a negative mark on your credit report. For instance, if your business gets into a financial bind, you don’t want your personal credit score to be affected as it would have a negative impact on receiving a personal loan or credit cards for personal use. You also do not want to hinder your chances at a business line of credit due to personal credit score issues.
4) Encourage vendors to report payments. One of the quickest and easiest ways to improve your business credit score is by having vendors report payments to the credit bureaus. Having positive marks on your credit report is going to improve your credit score in time. If you have made payments on time to various vendors, encourage them to report those positive payments. The more payments reported as being paid on time, the better your business score will look.
5) Reduce outstanding balances. Begin paying off outstanding balances to pay off your debt. By taking care of past debt, you are constantly decreasing the amount of money you owe on your credit accounts; you’ll soon notice your credit score improving.
Maintaining a good credit score has a multitude of benefits for your small business. Therefore it is vital that you do your best to improve your credit score and keep it at an excellent level once you are successful. Follow the above five tips to improve your small business credit score — and then maintain a good credit score.