Ensuring you have good credit for your business is essential for obtaining loans and operating successfully in the long term. Once you have that line of credit, your business’ credit score affects your financial future.
Maintaining a good credit score is vital. Here are 8 tips to improving your business credit score:
Refinance
Refinancing your existing loans can give you a lower interest rate and make the debt easier to pay off. The better your credit rating is, the easier it is to refinance your loan with a lower interest rate.
Make your payments on time
Keeping track of all deadlines and making payments on time is crucial to improving your credit score. A late payment could be reported, and your credit score will drop as a result. In addition, late payments often incur penalty fees—eventually, the costs will add up and you’ll be paying more than you owed.
Getting into the habit of making payments on time can save your credit score. You can even make payments in advance, saving you the risk of accidentally missing the deadline.
Limit new accounts
Once you have your business credit card, don’t open new accounts if you can avoid it. New credit applications can have a negative effect on your credit score. Companies will offer incentives for opening new accounts, but keep them to a minimum to keep your credit steady.
Don’t close your old accounts
It may seem natural to close old accounts once you’ve paid off the debt, but keeping them around will have a more positive effect on your credit score. Credit history is a factor of your credit score, and keeping those old accounts around will benefit your report. It shows potential lenders and investors that you pay off debt reliably and they can trust your financial future.
Don’t mix business and personal finances
Make sure all of your accounts are categorized properly. Open your business accounts with your Employee Identification Number, not your social security number. Keeping your business accounts separate from your personal accounts will help you maintain good credit on both—or keep bad credit from your personal account from affecting your business score.
Handle problems promptly
Things can go wrong, and missing a payment is not the end of your good credit. If you know you are going to have problems making a payment or you made a mistake, call the lender and discuss the problem. Effectively communicating your situation can convince them not to report the late payment immediately, giving you time to make the payment before it hurts your score.
Monitor your business and personal credit
Keeping tabs on your business credit score is the best way to make sure the report is accurate. You can keep track of how your habits are affecting your score as well as find errors that could be negatively impacting your credit. Monitoring your personal credit can also help when lenders and investors are looking at your report. Some lenders will look at your personal credit score in addition to your business credit, so keeping both under control will help your business.
Fix errors quickly
If you’re monitoring your credit report, it’s likely that you’ll find errors that are hurting your score. Fraudulent accounts and other mistakes that go unnoticed will continue to hurt your credit score and can lead to bigger problems. Fixing those errors as you find them can improve your credit report and ensure that the data your lenders are seeing is accurate and reliable.
At Fundation, we look at more than just business credit scores when reviewing small business loan applications. Contact us today to find out more!
