Meta Title- 5 Strategies to Boost Business Credit Score

Meta Description- A strong business credit score reflects more than just a number shaping your business’s financial health and credibility.

Alt Text- Business credit score gauge

 

5 Proven Strategies to Elevate Your Small Business Credit Score

 

Just like your personal credit card ratings, your small business credit card ratings also play an important role in better financing and growth opportunities. A strong small business credit score stands for more than just a number for your business. This number can easily shape your business’s financial health and credibility. It is important to understand that lenders, especially banks, review your credit history. Why do they do so? Just to make sure how risky as a borrower you are. This quick access to credit ratings helps them decide whether to extend credit to small businesses based on their credit ratings.

 

For a better understanding, higher credit scores can help you secure lower rates with better terms on business loans and other financial solutions. You may also face loan rejections or end up paying more for the same lending product if your credit score has taken a hit. But not to worry, there are many ways to improve your credit score for fast funding. So, let’s just

focus on the top five essential strategies that will surely help to improve your small business credit score in the blog below.

 

What is a Business Credit Score?

A Business Credit Score is a number on your credit history that applies to a business, unlike a particular individual. This score reflects your business’s financial health and reliability to seek credit and financial help from banks and lenders. Unlike personal credit scores that range between 300 and 900, a credit score varies between 0 to 100. However, 75 is considered to be the best credit score for small business loans.

 

The credit scoring companies calculate the business credit scores that are based on a variety of factors like size, age, credit history, and legal woes. There are three major credit calculating firms Experian, Equifax, and Transunion that curate your personal credit history to generate a FICO score. Additionally, the FICO-SBSS score is used by SBA Lenders to see whether you are in the right position to get a business loan.

 

Top 5 Essential Strategies for Boosting Small Business Credit Score

 

A strong credit score is significant for a variety of reasons. In order for a small business to expand, obtain funding, or operate efficiently on a day-to-day basis, having a solid credit score is essential. Here are the top five essential strategies to boost your small business credit score and open doors for numerous opportunities:

 

1. Keep Personal and Business Finances Separate

The first step to improving your credit score is as simple as it sounds. And why is that? Combining your business and personal finances can lead to a great deal of financial confusion. This only makes it more difficult for you to see where the gaps are. Having distinct accounts will allow you to better monitor your business payments rather than being lost in between personal and business transactions. This will again build a strong business identity to ask for funds from lenders. Thus, this shall lead to powerful credit evaluation for your personal business enterprise.

 

What to do:

• Open a dedicated business bank account.

• Apply for a business credit card.

• Ensure business expenses are managed through these accounts only.

 

2. Timely Payments

Just as it is with your personal credit card, timely payment greatly affects the score of your business credit card. A missed payment of your credit card bills can harm issuers more than anything else on a long-term basis. With a low credit score, your business credibility is put in question if you are planning to avail yourself of a small business loan. Therefore, showing that you have been able to stay on top of payments will show lenders/federal entities that your business is reliable enough for it to be deemed creditworthy.

 

What to do:

• Use automated payments for recurring expenses.

• Set up calendar reminders for payment dues.

• Paying off high-interest debts first to avoid late fees and penalties.

 

3. Monitor Business Credit Reports Regularly

 

Checking your business credit reports on a regular basis can ensure accuracy and catch anything suspicious early in the game. Believe it or not, addressing any inaccuracies on your business credit report and overseeing the type of financial reputation you have does take time. The major business credit bureaus in the U.S., Dun & Bradstreet, Experian, and Equifax all provide simple ways to get your hands on a copy of those long-awaited reports. With this, you can also fix mistakes relatively quickly which results in generating a strong credit score.

What to do:

• Errors, such as incorrect payment information or outdated data, can lower your score.

• Unfamiliar accounts could signal fraud or identity theft.

 

4. Establishing Trade Lines

Another essential strategy for a strong credit score is establishing trade lines. If you are starting a new business or own a small business with a limited credit history, you can benefit a lot from this. Establishing trade lines with vendors and suppliers who report payments to credit scores can easily build a strong credit score. How can you do so? You can ask the suppliers to report your payment history which will in return boost your credit score over time.

 

What to do:

• Seek out suppliers who report to business credit bureaus.

• Always pay on time to build positive trade references.

• Diversify your credit sources (e.g., line of credit, business loans) to show a healthy mix of accounts.

 

5. Keep Your Credit Utilization Low

Credit Utilization is known as the ratio of your credit card balances to your credit limits. In simple words, the higher your credit utilization, the higher the negative impact on your business credit scores. You can easily keep your credit utilization low by diversifying your credit cards, keeping old credit accounts open, and asking for an increase in credit limit if necessary. Hence, it’s better to keep your credit utilization low so that you can demonstrate responsible credit management for a positive effect on your credit score.

 

What to do:

• Ensure less than 30% of your available credit limit usage.

• Clearing off debts in full each month if possible.

• Request an increase in your credit limit to lower your utilization ratio without changing your spending habits.

 

Conclusion

So, this concludes our blog about the top five essential strategies that can help you improve your small business credit score. Remember, this is not an overnight effort. You need to be consistent with smart financial management and patiently build a strong credit profile. This will result in the growth of your business and will also help in strengthening your relationships with the suppliers.

 

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