Improve Your Business Credit Score

on Monday, 13 March 2017.

To improve business credit score isn't always easy but imagine how much more purchasing power your company would have with an improved credit score.

According to the Forum of Private Business, “your credit record is one of the most important factors when it comes to getting the finances you need to start, support and grow your business.”

So, the question is how to do it. Improving your business credit rating may not be easy, but it is certainly possible. In fact, there are 8 key ways to increase your business credit rating. Let’s explore each of them together.

1. Set Up a Cash Reserve

A key element to improve business credit score is to be able to pay bills fast. There is no worse feeling than having to borrow more money when you already owe money and are working hard to improve your credit rating. And you may want to use all the cash you have to invest back into your business. The problem with not keeping any cash in reserve is that you will have to borrow when you hit a dry spell. The key is to put aside some savings for when times get rough. Use the extra cash during good seasons to invest and rely on the cash reserve to get you through when times get rough. This way, you can avoid incurring further debt which could have a negative impact on the process you make towards improving your credit rating.


2. Set Goals in Place

A goal without a deadline is just a dream. Determine what credit rating you want and decide when you want to have that credit rating. And write it down. To add even more power to this step, make your goal public. Tell everyone in the company that “we will have X credit rating by X date.” When you decide on a goal, write it down, and make it public, you will end up hitting your target and accomplishing what you set out to do.


3. Pay Your Bills Before They Are Due

You are probably already aware that if you are late on your payments that will have a negative effect on your credit rating. The key thing to improve business credit score is to pay on time. But did you know that the opposite is also true? If you pay your bills ahead of time, you could get a positive reporting towards your credit rating. The more often you stay ahead of the game and pay your bills before they are due, the more frequently positive reporting will go to your credit rating.


4. Keep Track of Who You Owe and of Who Owes You

If someone doesn’t pay you, you lose capital that you could use to raise your credit rating. Likewise, if you do not pay someone you owe, negative credit reporting will affect your credit. The key is to make sure the people who owe you pay you and that you pay the people you owe. So, how do you know who owes who and when? You track it. Your system doesn’t have to be sophisticated. It doesn’t have to be the best, most recent app for financial tracking. It just has to work. The goal is to make sure you know who owes who and when. Track it, so that you can manage it effectively.


5. Make Sure Vendors Report Your Payments

When you are working hard to raise your credit rating, you want to make sure that your vendors report your payments. When you pay them consistently over a period of time, especially when you pay them before the due dates, ask them to report the history. Every positive report works in your favor. And you are already doing the work, so make sure the people you are paying give you credit for your effort by letting your credit know about your payments.


6. Keep Your Credit Balances Low

Having too much debt in relation to your overall earnings is bad. Even if you are making payments on time, you do not want your credit balance to rise too high. Ideally, you want to avoid debt as much as possible. But if you must have debt, make sure it doesn’t rise above 30% of your line of credit. Having too much of your potential credit used up for any length of time is bad for your rating. Keep the balance low and make sure you stay on top of all your debts.


7. Correct Mistakes on Your Credit Report

Faulty credit reporting does occur. Whereas you cannot buy some kit from the internet to cleanup your bad credit rating, you can fix bad credit ratings that are the result of incorrect information. If one of your vendors incorrectly reports something to your credit, you can the vendor remove it. The law is on your side with this aspect. It is therefore a good practice to regularly check your credit and make sure it is correct. If by some chance it is not, make sure you have the responsible party fix the mistake.


8. Avoid Applying for Credit Too Often

When trying to improve business credit score keep the quantity of applications to a minimum. If you apply for credit too often, it could negatively impact on your credit score. It is sometimes necessary to apply, but avoid doing it too excessively. Even if you apply for credit and get denied, the application can have a negative effect on your credit. So, apply if you need to, but don’t overdo it.

Ultimately, you can improve your business credit rating. Put cash aside so you have it when you need it. Write your goals and pay your bills before they are due. Keep track of your debts and debtors and make sure your vendors report your payments. Pay off your current debt, correct any mistakes on your credit report, and refrain from applying for credit too often. By following these 8 tips, you will surely see a positive increase in your business credit rating.

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