Now, more than any other time in recent history, it’s important for small and large businesses alike to pay close attention to their credit scores. Unfortunately, some small business owners didn’t learn this important bit of information until after a time when needed credit was denied based on the current credit score of their businesses. The good news is that this is something that can be fixed. While no magic bullet quick fix is available, these steps can help you greatly improve your small business credit score.
Know and Understand Your Credit Report
The biggest challenge many business owners face is that they either don’t know their current credit scores or don’t understand what it means if they do. If you don’t have a copy of your commercial credit score, obtaining one needs to be your first step. Once you have the report, it’s time to learn what it means. Commercial credit percentile scores fall between one and one hundred and the scores, or between 101 and 670 in raw score terms, are weighted according to several mitigating factors such as other businesses in your area and in your industry as well as the financial and non-financial transactions your business makes. The higher the score, the less probability for delinquency.
Make Timely Payments
Whether it’s utility bills, lease payments, or creditor payments, a history of paying bills in a timely manner can have a bigger impact on your commercial credit score than most business owners realize. It’s not so much that it has a favorable impact as the fact that it doesn’t have a negative impact. Utilities are notorious for reporting delinquencies. While they may not report payments that are made on time they won’t be reporting them as delinquent when they are and that bodes well for your credit future.
Keep Your Debts Reasonable
According to Experian, businesses should work to keep their balance at about 20 to 30 percent of their credit limits. If your debts are running pretty close to your available credit limits, then it’s a good idea to focus your effort on paying down your existing debt rather than incurring additional debt.
Keep Older Accounts
While it’s nice to have something shiny and new every once in a while, when you’re trying to rebuild or repair your business credit you do not want to adopt an “out with the old and in with the new” philosophy. Older accounts present your business as one that is stable to new creditors and is a good sign for the sake of your credit score.
The most important ingredient to add to the mix of improving your small business credit score is patience. No changes are going to take place overnight, no matter how diligent you are in adopting them. It takes time for credit scores to fall and it will take a little bit of time and care for them to start moving up again too. These steps will certainly help.