Your credit score is not just another numerical figure you write on sticky notes or type into your reminders app. It’s not another number that you “just need to maintain,” and it is not just another dull digit that you need as a requirement for other purposes. Your credit score is a number that can significantly tell a lot about your financial health.
When talking about starting your own business, having a good credit score is one of the most important things you need to consider. There is no doubt that it is a challenge to start your own business, and knowing the necessary ways to sustain it is essential.
One way of starting your business is by getting a loan. The kind of loan that you’ll get will vary depending on your credit score. If you have an excellent credit score, you will undoubtedly get better offers, but having a low credit score will indeed limit your options. Read below to know how to better your business credit score to get more favorable loans on your way.
Separate Your Personal and Business Credit
Most business owners, particularly those who are just starting, make a mistake when using their personal credit as their business credit. This kind of practice could be risky, especially if your business is in shambles. To avoid having trouble, you should have a separate account for business credit. You can do this by applying for a business credit card online.
Besides, having an excellent personal credit score will not guarantee that your business will also get exceptional loan offers. Creditors nowadays do not rely on personal credit scores anymore because your personal credit score cannot substantially give them a reliable picture of your business behavior. Try to visit Crediful now to know about credit scores and more!
Furthermore, some creditors often use scoring tools to integrate personal and business credit to assess your creditworthiness further. Ensure that you pay your business debts on time to build your transaction history and your business credit on a more positive note.
Pay Your Bills on Time
Being diligent is the right attitude to have, especially when paying your bills on schedule. It may seem irrelevant at first, but it will pay off big time for you and your business when done consistently. A six-month consistency in paying your financial responsibilities can make a difference in your business, and it is also a good habit to keep.
Also, paying your bills on time or way before the deadline will give you a desirable impression from the creditors. This will help you to get loans that are favorable to you and your business ventures. Moreover, it will also help you maintain good relationships with your creditors and ultimately benefit your part.
Monitor Your Business Credit Report Regularly
Credit rating agencies like Equifax and D&B determine your business credit score, and they derive it from mathematical calculations based on a lot of factors. These factors include company size and structure, accounts-payable balances, timeliness of payments, time in business, credit utilization, industry risk, bankruptcies, and more.
One reason to regularly monitor your business credit report is to check for any errors. If you see any error or not right on your credit report, do not ignore it. Instead, contact your credit rating agency to fix any mistake quickly. It is advisable to utilize the federal law that gives you a free report from your credit bureau at least once a year.
It should be one of the priorities to regularly check your business credit report to avoid inaccuracies and avoid future troubles for your business. It would therefore put you in a desirable position to get a loan for your business.
Keep All Accounts Open
Contrary to former beliefs that you need to close old or inactive accounts to up your credit score, experts say this is not recommended. Your oldest accounts are valuable to you and will determine your creditworthiness from the creditors. The reason is that your credit history will be one of the contributing factors for credit agencies to determine your credit score.
Also, closing your old credit accounts may harm your future business transactions. It may limit the amount of credit that will come your way. Another thing is that your old credit accounts can help by reducing your credit utilization ratio. You will have a lower credit utilization percentage if you keep your balances to zero.
Ask Suppliers or Vendors to Report Payments
Asking your suppliers or even customers to report any business transactions with you will help you build a desirable business profile. Ask suppliers or vendors you have established a good payment history to write or make positive payments to your file. This way, it will help increase your business’ credit score and ultimately favor you for better loan offers.
Moreover, suppose the people you do business with are all creditworthy. In that case, this will help your business attract suppliers or vendors with the same creditworthiness to help establish your business profile and ultimately grant you loans for future business endeavors.
Takeaway
Owning a business is not as simple as making it last. It should be profitable enough and creditworthy enough to make it outstanding in the eyes of creditors. Having a good business profile accompanied with an excellent business credit score will undoubtedly make your business a gem in the industry.
Businessman pulling out credit card -DepositPhotos
