5 ways to improve your company’s credit score

5 ways to improve your company's credit score

5 ways to improve your company’s credit score

yours Commercial Credit Score It is an important indicator of your company’s overall financial situation.Figure out How to improve your credit score It may seem unstoppable, but it is an important investment for your company’s future financing success.

To help improve the credit education of business owners, we are breaking down all the information you need to know about business credit, including How to build credit, How to repair credit, And why commercial credit scores are so important.

What is commercial credit and why is it important?

Strong business credit is one of the best assets you can have as a business owner. Your business credit score (based on your company’s debt, payment, and credit history) is a sign of your credibility. Your score basically tells lenders, suppliers, and credit card companies how reliable you are in paying bills and repaying debts on time.

The higher your business credit score, the more likely you are to be approved Commercial loans There are preferential terms. Think about it: lower interest rates, larger credit lines, or longer repayment periods. A healthy business score can also provide you with more influence when negotiating insurance premiums or discussing payment terms with suppliers and landlords.

If you don’t have a commercial credit score, please follow the steps below to start building commercial credit in your company’s name:

  • choose one Business structure Separate your personal and corporate finances, such as a limited liability company or company.
  • Apply for one Employer identification number (EIN).
  • Open one Commercial bank account.
  • Personal Credit and Commercial Credit

    The personal credit score is based on your personal credit history, including the amount of your debt and the number of credit cards you have opened. The personal credit score ranges from 300 to 800, while the commercial credit score ranges from 0 to 100. so, What is a good credit scoreA personal score of 700 or higher is good; for commercial credit, most credit reporting agencies consider 80 or higher to be good.

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    Some lenders check personal credit scores when reviewing commercial loan applications, but most people prefer to assess commercial credit scores.However, if you do not have business credit-whether it is because your business is new or you are Sole proprietor— The lender will rely on your personal credit history to assess your creditworthiness.

    How to improve your business credit score

    There is no foolproof way to improve business credit scores, but certain strategies can help. If you want to improve your business credit score, please try the following five strategies:

    1. Update your information to the Commercial Credit Bureau

    There are three main commercial credit bureaus that collect your credit information and create your commercial credit score: Dun & Bradstreet, fax, and ExperianNot only are the three bureaus slightly different in formulas for creating commercial credit scores, the lenders and suppliers also report credit information to the different bureaus. This is why it is wise to update your credit file with all three bureaus instead of one bureau.

    First visit the website of each credit bureau and check its guidelines for establishing or maintaining commercial credit.From there, you can view your files and upload the most recent Financial Statements, Or check your commercial credit report for errors and inaccuracies. If you find any problems, please report them to the credit bureau immediately. Keeping your credit file clean, accurate and up-to-date is the key to improving your score.

    2. Pay bills on time

    Making timely payments to lenders, suppliers, utilities, and landlords is one of the easiest ways to improve your credit score. cash flow Exceeding the due date, but repaying the loan early—even a day or two earlier—can improve your credit score.

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    Here are some tips to ensure you pay on time:

    • Track your accounts payable in a spreadsheet.
    • Set up automatic online payments for recurring expenses, such as utility bills and monthly debt repayment.
    • Submit the invoice as soon as you receive it, and set a calendar reminder to pay the bill when it is due.
    • Block one day a week to pay bills manually.

    3. Maintain a low credit utilization rate

    Credit utilization is the ratio of the amount of credit you use to the amount of credit available. Credit reporting agencies usually value low credit utilization because it means you are not making the most of your available credit.

    The good rate is 30%, but the excellent rate is about 10%.Suppose you have 20,000 USD Commercial Credit LineTo achieve a 30% credit utilization rate, you must not use more than $6,000 each time before the balance is returned to zero.

    Try the following strategies to reduce your credit utilization:

    • Keep your balance as close to zero as possible. When you pay off your balance regularly, your credit utilization will drop.
    • Make small payments throughout the month. Instead of paying only once a month, try to make multiple small payments throughout the month to ensure that your balance is not too high.
    • Increase your credit limit. Call your credit card company or credit card issuer and request an increase in the limit. When you increase the limit without increasing your balance, your credit utilization will decrease.
    • Open a new credit line. If you open another line of credit and Don’t use it, You will have more total available credits, which will lower your ratio.

    4. Open a new business credit card

    Get the second or third Business credit card It can help improve your business credit score-as long as you know your expenses and monthly payments.

    The trick is to apply for a commercial credit card that reports to one of the three major commercial credit bureaus. To find out if your credit card issuer sends its information to credit bureaus, please visit their website FAQ or call customer service for more information.You can also view the list of major credit card issuers that report to the credit bureau here.

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    Once you get your new Business credit card, Figure out how you will use it strategy. One option is to designate your card for specific business expenses, such as office supplies or fuel for delivery trucks. This way, you can easily control your monthly expenses and schedule regular payments to keep your balance low.

    5. Add a trade reference to your credit file

    Many credit bureaus use trade references to understand your payment history with suppliers and suppliers. Trade references are based on factors such as the method of payment, the current amount you owe, and the current amount overdue (if any). Positive trade references can help improve your business credit score.

    If you work with a few different suppliers to purchase supplies or materials for your business, please ask them to report your payment to the business credit bureau.As long as you comply with the terms of the trade agreement-such as payment Within 30 or 60 days After receiving your goods-your trade reference should be positive.

    If your supplier does not want to report to the credit bureau, you can still list them as a trade reference in your credit bureau account. The credit bureau you reported will follow up to collect your payment information.

    Build better business credit

    Whether your company is a newly established company or a more mature company, it is important to work hard to improve your company’s credit score.Adjusting your payment habits and maintaining a healthy credit can improve your score over time, allowing you to better access funds and Keep growing.

    Fundbox and its affiliates do not provide tax, legal or accounting advice. This material is for reference only and is not intended to be provided and should not be used as a basis for tax, legal or accounting advice. Before conducting any transaction, you should consult your tax, legal and accounting advisors.

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