9 Ways on How to Increase Your Business Credit Score
If your company struggles with high interest rates, short payment cycles and limited credit, boosting your credit score is a clear-cut solution. By strengthening your business credit history, you build trust and gain access to low-cost financing. You may even slash the organization’s insurance premiums and earn flexibility when buying or leasing vehicles and commercial property. Use the following tips on how to increase your business credit score.
Basics of Commercial Credit
Banks and suppliers evaluate your credit worthiness with the help of three major business credit bureaus. The largest, Dun & Bradstreet, focuses primarily on vendor relationships. For example, if you miss a payment on your Net 30 Uline account, the Slip-up impacts your D&B Paydex score. On the other hand, Equifax’s Business Credit Risk Score concentrates on lending relationships, such as your commercial loan history with your lendor. Experian creates a corporate credit score based on both vendor and lender credit usage.
How to Raise a Small Business Credit Score
Despite the different scoring systems, you can take action to influence all three credit rating agencies. The U.S. Small Business Association recommends the following:
- Keep professional and personal finances separate. If you operate as a sole proprietorship or partnership, consider an LLC, C corporation or S corporation instead. You limit personal liability, avoid commingling funds and protect the corporate veil. Establish a business identity by opening business bank accounts and obtaining a D-U-N-S number.
- Apply for supplier lines of credit, merchant accounts and a company credit card. Use the flexibility to conserve cash while financing inventory, office supplies, technology and other necessities. Staples, UPS and equipment lease providers can be good sources of introductory small business financing.
- Pay bills on time or even ahead of schedule. Payment history accounts for more than a third of your business credit score. By negotiating discount for pre-payments, you can bolster your cash flow and strengthen your case for future financing.
- Review small business credit reports every three to six months. Ensure that company facts, financial details and payment relationships are accurate. Dispute mistakes and falsely reported negative activity.
More Methods to Improve Your Credit History
Inc. Magazine offers these additional ways to improve a small business credit score:
- Don’t use more than a third of your total available credit. For example, if you hold lines worth $150,000, carry a maximum balance of $50,000. If industry standards are lower, you may need to shrink your debt financing even more. Make extra payments weekly or monthly to keep balances low.
- Resolve liens, judgments and bankruptcies. They can negatively impact your credit score for six to 10 years.
- Grow your company. Large, established businesses typically receive better deals than sole proprietors and startups. A long history of on-time payments also generate trust from suppliers and lenders.
Increasing a credit score takes time, but the rewards are wroth the effort. By developing a stable business profile and using credit wisely, you can establish a strong small business credit score.