A business credit score is crucial to a company’s success and health. If you have a business and any kind of open credit, you have a corresponding credit score. To get any kind of financing, you must explore ways to boost your business credit score.
Generally, a business credit score is the same as a personal credit score. Credit reporting agencies use different methods to calculate your company’s creditworthiness, including your outstanding balances, number of trade experiences, and payment history. The number ranges from zero to 100; the closer the number is to 100, the better the credit score is.
High credit scores mean you can borrow more cash. On the other hand, low credit scores may prevent you from borrowing money for your business. Fortunately, there are various ways to improve your business credit score. To know more, you can visit helpful websites, such as https://digitalhoney.money/best-credit-builder-loans/ and keep the following tips in mind:
1. Keep Your Old Business Credit Cards
Your credit history is essential to determine your credit score. Having an old credit card or some credit accounts shows signs of stability and reflects the trust vendors and suppliers have in your business.
The older your credit account is, the greater the impact on your credit score is. Once you cancel an old credit card, it eliminates the associated credit history. This history can’t be included while calculating your business credit score.
If you have different credit cards for your company and want to cancel a few, it’s wise to close the latest ones, so it won’t affect your credit score negatively. If you don’t have a credit history and want to build one, you can visit sources, such as https://www.creditstrong.com/credit-builder-loan/ to get more information.
2. Pay Your Bills On Time And Regularly
Cash flow is often a concern for businesses. But paying bills late to save cash flow may have a negative effect on your credit score. A business that shows a pattern of late payments is a strong signal that it’s in financial trouble, and it has a high likelihood of default.
Many Credit Reference Agencies (CRAs) have third-party payment data in their models. It means that all late payments are more likely to hurt your business credit score. To avoid that and protect your credit score, restructure your payments and ensure that you pay your bills on time.
3. Check Your Credit Report For Mistakes
If you’re one of the business owners who doesn’t track their credit scores often, you might want to rectify it. You may check your business credit score for free and get your detailed credit report in a few minutes.
As you monitor your company’s credit report, check for errors or inaccuracies. Even small mistakes in your credit report, like incorrect mobile numbers, may affect your business credit score. If you notice any inaccuracies or mistakes on your credit report, don’t forget to report it to the credit bureau to get it rectified.
4. Limit Your Credit Applications
While it’s best to have various forms of credit and open another line of credit that may help boost your score, you might not want to go overboard with your applications, particularly if you’re often applying because you’re getting turned down.
Keep in mind that credit bureaus are aware of the number of times you’ve applied for credit in the past several months. Also, a credit check is a soft pull, which might not show up on your report, but a hard pull may affect your credit score.
Moreover, it’s critical to note that inventory financing and equipment lease count as credit applications, not just credit cards. Therefore, if you’ve already looked into some forms of financing in the past, try holding off until the credit bureau expunges your pulls.
5. Keep Your Credit Card Balances Low
A credit card exists for a reason, and you must definitely use it. But you must try keeping your balance below 30% and avoid using many credit cards with the balance spread across them. Maxing out your cards or having several business credit cards will give lenders the impression that your business is unstable.
Remember that lenders look at your company’s credit utilization ratio, which is calculated by how much you owe divided by the amount of revolving credit that you have available. To keep this ratio low and build your business credit, you may pay off your balances once a month, ask your credit card providers for a limit increase, or reduce your credit card spending.
Your business credit score is a crucial factor in securing business loans. However, there’s nothing for you to worry about if your credit score isn’t that stellar. It’s because the above tips can help you boost your business credit score over time. All you need to do is to implement them properly and never hesitate to ask for help from your financial advisors who will offer better guidance.