How to Better Your Business’ Credit Score and Why It Matters

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By Dzhingarov

As a business owner, there is no doubt that you are always hyper-aware of how your business is doing, how it can improve, and what its future looks like. Everyone hopes the best for their venture, but unfortunately, life can happen, and it can throw curve balls here and there. One of the most common curve balls that businesses encounter is cash flow problems. The goal is to always have that healthy cash flow that allows you to operate as planned, but that’s not always the reality. The company can run into cash problems that can result in a poor credit score.

So, why does a poor credit score for your company matter and what can you do to improve it? Let’s take a closer look.

Why it Matters?

The first thing to examine is why a poor credit score even matters. Sure, it may not put a halt to business operations, but it can severely impact the company in the future. Let’s say that you end up needing a loan, a business line of credit, or even business credit cards. Suddenly, the importance of business credit becomes apparent, as you may not be approved by a traditional lender. Instead, you could be looking at a high-risk loan, which will carry a higher interest rate.

As for how your business credit score is calculated, there are a number of factors that play into it. These include outstanding balances, credit, liens, payment history, the business size, the age of the business, and more.

In a nutshell, having a poor score can actually hold your business back and prevent it from growing and evolving. If you were depending on credit to purchase new equipment, machinery, more office space, additional inventory, or even hiring additional staff that score can throw your plans right off.

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What Can You Do About It?

Now that it’s clear just how harmful a poor business credit score can be to your company, the next question is what can you do to improve it? Much like improving your personal credit score, it is a process that takes time and requires a number of steps in conjunction with one another.

A good place to start is with a credit report to ensure that all information is correct. There may be debts outstanding on the credit report that you have in fact cleared or debts that should never have been on there. From there it’s important to start reducing the amount of credit you are using, pay all bills on time, work to chip away at debt, and ensure none of those debts end up in collections.

It’s a process that will require constant attention not just for weeks or months but years in order to stay on top of it. Once you do improve the rating, you want to be sure it stays in good standing.

Working Your Way Out of Bad Credit

By understanding just how harmful a poor credit rating can be for your company, and then taking the steps to remedy it, you’ll be setting your business up for success.