A solid business credit score can help your business succeed in many ways. From having access to low interest business loans to the ability to work with companies that view your business as financially stable, business credit scores provide a small snapshot of how you run your business.
For the veterans, if your score isn’t the greatest, don’t worry. Here are 6 ways to improve your credit score:
1. Pay down debt – one of the easiest and quickest ways to improve your credit score is to pay your outstanding credit and loan debt. Remember, the more debts you have, the lower is your score. Rather than making minimum payments each month, try paying more to reduce the number of payments. Use the snowball approach: After paying off one debt, take the extra money and put it towards paying down the next debt. Applying for a credit card might acutally be a faster way out of debt. Take for example the gold card from Clydesdale Bank that offers north of a year interest free. Team one of those up with the snowball approach and you’re well on your way to getting rid of your debt faster.
2. Do not take on more debts – If possible, avoid taking out business loans until absolutely necessary. Try to use profits from your business to fund new projects, pay the monthly bills, or fuel expansion. Depending on your business, this may not be possible. If you need to take out business loans, try to pay them off as quickly as possible to maintain a healthy business credit score.
3. Put a financial plan in place – Going forward, you need to create a budget plan that helps pay off your loans. Then, you need to create a financial plan that forecasts future earnings and expenses for the next few years. This gives you a better view on how much capital you need to keep your business afloat. Do this and you will be successful. Having a financial plan gives you more control over your business. This way, you can plan ahead before taking out a loan so you can pay it off quickly without missing or delaying payments. There are some great ideas here to get your business finances into tip-top condition.
4. Settle accounts with vendors/supplies/others – if you owe money to vendors and suppliers, your business credit report will show this. Contact all vendors and suppliers you owe money to and set up a repayment plan. Most will give you some extra time to repay what you owe. The same goes if you’re owed money. Contact customers, clients, and anyone else who owes you money to work out a payment plan. The more money you collect, the better off your business will be in the future.
5. Contact the credit reporting agencies – Depending on where you are, the credit reporting agencies are Graydon, Equifax, D&B, and Experian. Contact them and make sure your business information remains current. Unfortunately, many companies have poor business credit ratings, simply because the information on file isn’t complete or accurate.
6. Get a copy of your business credit score regularly – review your score yearly to see if there are any discrepancies. Fight errors by contacting creditors, banks, and reporting agencies to have the misinformation removed. You must prove in writing that the information reported is inaccurate, so prepare for battle by producing bank statements, credit statements, loan pay off notices, and other documentation you have.
Unfortunately, credit reporting agencies each have their own rating system, which means your business has multiple scores – one or two good scores and bunch of bad ones. You need to keep these tips in mind especially if you are applying for a credit card today. To build a solid reputation, you will need to review credit scores from multiple agencies each year, build trusting relationships with customers, clients, vendors, and others, pay down debt as soon as possible, and always maintain accurate financial records.
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