One of the most important numbers your business needs to pay attention to is your business credit score. Many businesses recently discovered that they needed a quick infusion of cash due to a sudden lack of business from COVID-19. At the same time, they also found out that their business credit score greatly affected how much money they could borrow. By ensuring that your business credit score is what it needs to be, you can borrow the money you need when you need it and at a good interest rate.
In the day of uncertainty that we live in now, it is always a good idea to be able to get the best loan terms possible. It will not only help you when loans are needed, but it will also enable you to get better deals when creating partnerships or trade agreements, appealing to angel investors, getting a loan from the SBA, and getting better business insurance rates.
These five money management tips will help you build your business credit score.
- Check Your Credit Report for Misinformation
Just like on a personal credit report, incorrect or outdated information can find its way to your report. Be sure to look at your credit reports regularly from the following three credit bureaus: Experian, Equifax, and Dun & Bradstreet. With Dun & Bradstreet, be sure to provide what information you can about your business – which can help your credit score. Each bureau may have different information on them but bad or negative information will lower your credit score. Some of it you may be able to have removed if you talk to the companies that reported it and settle those issues.
- Make Payments on Time
One of the biggest factors that will influence your business credit score is your payment history. Paying on time, or even early, shows that your business can make repayments. When your payments are late, it reveals that you may be struggling financially and this will lower your credit score.
- Borrow Money from Lenders That Report to Credit Bureaus
Building up your business’s credit score means that you do not want to get money anywhere you can. You need to find out if that lender reports to the credit bureaus. If so, every payment you make will help raise your credit score. Even if you cannot borrow from a bank, find an online lender such as BlueVine, Funding Circle, Lending Club, and OnDeck – they do report to credit bureaus.
- Reduce Your Debt-to-Credit Ratio
Using higher percentages of the credit you have will lower your credit score. Ideally, your credit score will do better if you keep the debt-to-credit ratio to less than 30% – and 20% is even better. You can change the ratio in one of three ways: You can pay down the debt (or pay it off completely), ask lenders to raise your credit level or open a new line of credit.
- Establish Multiple Trade Lines
Creating at least three trade lines will also help build your credit score. Be sure to get ones that report to the credit bureaus and it will help raise your score. A trade line will let you receive goods and pay for them later. You will need to have at least three of these to get a score with Dun & Bradstreet.