Your business credit score is as important as your personal credit score, if not more so. A good business credit score can help you lease offices and retail spaces, can help you apply for lines of credit with vendors and can help you apply for small business loans. Working on building a good credit history for your business should be a key priority.
What Affects Your Business Credit Score?
A few key factors can affect your business credit score, including:
- How long your accounts have been open
- How much debt you have
- How many recent credit applications you have made
- Any collection actions or judgments against your company
- How consistently you pay your business accounts and vendors on time
What Helps Your Business Credit Score?
If you'd like to build up your business credit score, there are several things you can do:
- Keep your older accounts active and open.
- Pay down your business credit cards. If possible, pay them off fully every month. If you cannot do so, pay down as much as you're able to.
- Avoid applying for lots of credit at once. This temporarily lowers your credit score. If you know you're going to have to apply for a larger loan soon, try to avoid applying for other types of credit in the meantime.
- Keep your financial information and statements current. Although it won't improve your credit score directly, it helps keep you on top of your finances so you aren’t late with payments. Lenders also want to see your financial statements, so keeping them tidy and ready can help improve lender trust.
What Factors Increase Your Business Credit Score?
If your credit score for your business isn't quite where you want it to be, a few factors can help increase your overall score:
- Vendor reporting. Ask vendors to submit positive reports to business credit reporting agencies, such as Equifax and Experian, when you pay on time.
- Monitoring. Make sure you check your business credit score and credit reports at least twice per year. If mistakes occur on your credit reports or you’ve been a victim of fraud, cracking down on these problems quickly can help prevent financial disaster.
- Balances. Pay down your balances as far as you're able and if you must keep balances on your lines of credit or credit cards, spread them out over several lines of credit or credit cards to decrease your debt-to-equity ratio.
- Your business structure. Business structures can affect lenders’ willingness to offer you financing, so speak to an attorney about options for how you can structure your business.
Keeping your books clean and getting financial support can be an important part of your strategy for keeping your business credit score high. SLC Bookkeeping offers outsourced bookkeeping, outsourced CFOs, business consulting and related services. Contact us to help us get your financial house in order.