What is your business credit score? Hopefully, it’s over 75. Business credit scores are similar to your personal credit score. They’re both a way for lenders to determine how financially responsible and trustworthy your business is.
While the scores are on a different scale, how they work is very similar. This means you need to make your payments on time and not leverage too much of your available credit.
If you find that your business credit score could be better, then use these tips to boost your score.
1. Review Your Credit Report
The first step to improving your credit score is to pull your business credit reports. You can do this by ordering one from Experian, Equifax, or Dun and Bradstreet. You will have to pay for this report, but the fee is well worth getting the complete report.
Check the report for any errors. These mistakes can bring down your score. So by contacting the credit reporting agencies and fixing the mistakes is an easy way to boost your score.
2. Establish Credit Accounts
If you work with the same suppliers consistently, then it’s smart to establish a credit account with them. You’re already making on time payments. Put them to work so you can build business credit.
3. Decrease Your Credit Utilization Ratio
This ratio is the amount of available credit you’re currently using. You want to have a balance above 0% and below 30% used.
Too low, and you don’t have an established credit history for creditors to determine your payment responsibility. Too high and creditors might think you’re already using too much and in a potentially precarious position.
4. Pay Down Debt
Pay down your debt to decrease your debt utilization ratio. You can do this by consolidating your debt. This process combines all of your debt into one lump sum, lowers your interest rate, and makes it easier to pay off. If you’re unsure, there are several articles online to help you understand the credit card debt consolidation process.
5. Increase Your Credit Limit
Since your credit utilization is a ratio, you can decrease it by increasing your total amount of available credit. The easiest way to do this is by requesting a credit limit increase on your current credit cards. Just be sure to limit your spending and not increase your balance owed.
Another way to increase available credit is to apply for a new credit card. Be careful with this, though. When you apply for a new credit card, it will put a hard pull on your credit report, which will cause your score to dip.
Applying for too many new accounts in a short period of time will also make you look unstable. So choose your new accounts carefully. You also shouldn’t apply for new cards right before you intend to apply for other financing.
Improve Your Business Credit Score
Now that you understand how to improve your business credit score, you’re ready to get to work on yours. This means correcting errors on your report, paying down debts, and making payments on time. Work to lower your credit utilization ratio.
Browse our other articles and learn the secrets of making your business a success.
James Daniels is a freelance writer, business enthusiast, a bit of a tech buff, and an overall geek. He is also an avid reader, who can while away hours reading and knowing about the latest gadgets and tech, whilst offering views and opinions on these topics.