Business Credit Score Tips
A favourable business credit score is essential if you want the best rates on loans, credit cards, and other financial products. Several aspects impact your credit score and your chances of getting approved for credit.
Here are details of five tips to help you get started;
Make Payments On-time
One of the main factors that impact your business credit score is your payment history. Late payments can negatively impact your score. Late or missed payments with suppliers and defaulted loans with lenders can all hurt your credit score and lead to a Count Court Judgement (CCJ). Lenders and suppliers will want to see that you have a well-thought-out plan for managing your finances and generating revenue. Pay your loans, bills, and payments on time to avoid these negative marks.
Track Your Credit Score Regularly
It is essential to keep tabs on your credit score, especially if you’re applying for any loans or credit products. Regularly check your credit report to see how it’s trending. It will help catch errors or inaccuracies that drag your credit score down.
Of course, simply knowing your credit score is not enough – you also need to consider what lenders are looking for when they pull your report. You can get a copy of your credit score from each of the three major credit reporting companies (Experian, Equifax, and TransUnion) once a year at AnnualCreditReport.com.
Diversify Your Business Account and Personal Account
Having a dedicated bank account and using it exclusively for business expenses is another way of keeping your credit score healthy. Mixing your personal and business finances will make it hard to track your spending, which can lead to problems in terms of risk assessment.
Another benefit of keeping separate accounts is that it can facilitate building a solid business credit history. When lenders see that you have a long history of making on-time payments on your business credit card, they’ll be more likely to approve you for financing.
Avoid Closing Accounts
It might seem like a good idea to close credit accounts you no longer use, but this can harm your business credit score. That’s because closing an account can lower your overall credit limit and increase your credit utilisation ratio (the amount of credit you use compared to the available amount). A high credit utilisation ratio can harm your score. Keep your accounts open, even if you’re not using them.
Reduce the Number of Applications
Every time you apply for financing, it will be visible on your credit report as a “hard inquiry.” These hard inquiries can harm your credit score, especially if you have a lot in a short period. To avoid hurting your credit score, try to reduce the number of credit applications. If you need to apply for financing, compare different lenders before deciding.
Following these tips, you can enhance your business credit score, but remember, it takes time to build a strong credit score, so be patient and focus on making wise financial decisions over the long term.
