Being a small business owner you have a lot of responsibility, you must wear different hats in your business. At GROW we help consult our clients on some ways to build their credit. The day to day hussle in a business can make you overlook the fact that building business credit is indeed a priority that must be considered. Growing a business takes money, and that requires building up your business credit we will outline some ways on how you can build your business credit in this article.
If you’ve ever struggled to build and maintain a good business credit score, you’re not alone. Almost 40% of small business owners are turned down for financing due to insufficient credit history, and almost 30% are turned down due to low credit scores, according to a federal survey. Fortunately, there are still lending options available for those want to build bad credit. Your long-term credit plan, should be to improve your score, this is a sure way to open up larger opportunities to improve your business.
How to Improve your Business Credit Score
Start by understanding the difference between your personal credit score and your business credit score. About 40% of lenders will percent of review both credit scores, and half of the lenders will rely on the owner’s personal credit score.
Personal credit is simple your assigned a score by reporting agencies such as Equifax, Experian and TransUnion. It’s based on your personal debt experiences, including your payment history, outstanding balances and the length of credit, this is simple to understand and 680 is about average.
IN looking at business credit it is actually a bit easier to understand in our opinion. Your business credit will show the strength of your business when you apply for a loan. It’s based on your company’s financial history and is calculated by looking at your payment history with vendors, suppliers and lenders. This score ranges from 0 to 100, the higher the better.
Studies show almost 75% of business owners say they do not know what their business credit sco5re is. It is estimated that about 65% don’t know where to find it their business credit score. Getting this information is the first step to improve your business credit score. You can obtain your score for a fee from the business credit reporting agencies, Dun & Bradstreet, Equifax and Experian. Your score can vary depending on the agency; each calculates it differently. If you were denied a business loan due to information the lender found on your business credit report, you can get a copy of the report for free by making a request within 90 days.
Simple steps to improve your credit score.
1. Reporting Mistakes
Start by closely reviewing the reports, looking for inaccurate information. If you see anything on your report that’s wrong, such as an unpaid debt that you did pay, call the credit reporting agency and dispute it. The lender then has 30 days to verify the information in your file or it will be removed. This is a critical first step for improving your score.
2. Pay Bills On Time
The next step is also the easiest: start paying your bills on time. While this advice sounds like a no-brainer, it’s not uncommon to get busy with your day-to-day responsibilities and let bookkeeping tasks fall through the cracks. Establish a good system, and be diligent about timeliness. Late payments hurt your score. Pay at least once a month, or make more frequent payments if you’re able
3. Keep Accounts Opened
In the past I would close my old credit cards with high interest payments, I later realized this was the blemish that I had on my credit reports that did not bring me to the top percentile. I began keeping my accounts opened and within 90 days my credit score went into the top 10% with regards to ratings. So keep old cards open, I know it does not make sense logically but it works.
3. Pay Your Bills On Time
It’s very important to pay your bills on time, many businesses will report a late payment over 30 days. Paying your bills on time is essential to good credit. I know it can be a challenge when you own a small business to remember all your bills to pay, however its very important to keep a log on your computer and there are many different software programs that can help you, or simply just write the old fashioned way in a notebook when you pay your bills.
6. Open a New Account
This last point applies if you don’t have a lot of accounts in your business name, opened in your business name. Having no credit isn’t much better than having bad credit, a lender likes to see that you have accounts open so they can monitor your payment history. Repay any money you borrow or credit you use and do not take any more loans or credit cards out that you cant afford. Having credit available that isn’t used is a positive to credit reporting agencies.
Maintaining a Good Business Credit Score
As you take steps to improve your credit score, make time to monitor your progress and lear. Check your credit reports at least once a year — more often is ideal — and look for errors. If you find a mistake, get it corrected as soon as possible by filing a dispute. .
Having good credit is so important because you not only let borrowers understand your paying habits of debt but you help them to understand that your are responsible and can handle another loan. I always let people know about the great benefits of having good business credit, after all this is our business and the source of your income, isn’t it worth taking serious?
Give us a call at Grow business and speak with one of our business credit consultants today.
- On August 2, 2018