Tips for Improving your Business’s Credit
by Larry Slusser on March 3rd, 2008
Your business started out with great credit, but you hit a few bumpy roads along the way and need to improve your business credit line of credit or loan consideration. Banks will look at your credit rating, so it is important to maintain and improve that rating.
When you are reviewing your business credit rating, it is important to know that your business credit rating is a bit more volatile than your personal credit rating. If you have missed payments or have been late, particularly with large amounts of credit, your lenders will have a say in your credit report.
Not only does a good credit rating affect obtaining potential loans, it also can affect the vendors and the payment terms established. Therefore, it is crucial in all aspects of your business to pay your bills on time in order to maintain a good business credit rating. However, while it may take some time, there are a few steps to take to help you increase and/or restore your credit rating.
Keep on top of your credit reports. The first thing that you can implement is to review your credit rating on a regular basis. This will allow you to see where you are at, checking for errors or omissions. If you discover errors on your business credit report, it is important to follow the guidelines that the reporting agency has outlined. It may be worth a phone call to the institution that is reporting it incorrectly. Another thing to do is to remove expired accounts.
Pay your bills on time. This may seem basic, but your vendors and lenders have a huge impact on your credit report; therefore, paying them on time and for the amount that is due is important. Additionally, if you pay off your bills before the due date, you can request the suppliers to report this to the credit reporting agencies. This will have a positive impact on your credit rating and will help when you go to obtain further credit.
Keep your balances low. This may be harder when building your business at first, but as you continue to grow, if you can keep your unpaid balances on loans or invoices low, this will positively reflect your cash flow as well as show that you are financially disciplined. This will increase your credit rating over time.
Get a secured loan. When you decide to try and obtain a loan, going for a secured loan is a better option, particularly if you have collateral tied to your loan. The reason secured loans are a better option is that they will reduce the interest due, plus it will demonstrate to other lenders and vendors of your credit worthiness, not to mention strengthen your credit history.
Don’t max out your credit limit. There may come a time when you need to use it, and if you have maxed out your limit, that will have an adverse impact on your credit rating. What looks positive on your business credit rating is a lot of unused credit sitting waiting for you.
In essence, when you are trying to build up your business credit worthiness, ensure that you can pay your bills and on time, leave room for unused credit when you need it, obtain secured loans when needed, and check your credit report regularly to make sure that there are not any errors or omissions. Taking proactive steps to increase or correct your credit rating reflects positively with both lenders and vendors.