How To Properly Improve Your Business Credit Score

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By Adrian Cruce

The business credit score is simply vital for the success and health of any business. Whenever you own a business and open credit, there is a credit score that exists. The good news is that it is really similar to the personal credit score, which you most likely already know something about. The bad news is that most business owners do not carefully manage business credit score. This can prove to be a fatal mistake.

Why Improve Business Credit Score?

The main reason why you want to improve the business credit score is that it will directly impact financing you can secure. If you have high credit score it is possible to borrow more at better interest rates. Low credit scores can even prevent you from getting money when you need it the most.

Always remember that even when your business credit report is not great there are things you can do in order to improve the business credit score. Obviously, some strategies you can use are more known than others.

Below you can see the main ways in which you can properly improve business credit score through effective steps you can always take.

Check Credit Reports

The business credit report can be obtained from major credit reporting companies. They are not free but they are definitely necessary. After you know the score you know exactly what you need to do to improve it and more importantly, how much you need to improve it.

It needs to be added that you have to carefully check the credit report entries. See if there are some listings that are not correct. If this is the case, start the procedure to get them removed. Similarly to personal credit, there is always the possibility that wrong entries are present. At the same time, analyzing the entries allows you to see what should be a priority as you want to solve the big problems first.

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Always Pay Bills On Time

This is one of the easiest things you can do. When you pay bills on time you slowly improve business credit score. If you do not pay on time the credit score suffers. All that you might be doing to improve the score would be negatively impacted by the fact that you are late on payments.

Reduce Credit Utilization

One of the most important things the credit reporting agency analyzes as business credit score is determined is how much credit is used when compared with available credit. Generally speaking, the best ratio to have is under 15 percent. You can do this in different ways, like:

  • Paying Off Balances – this automatically decreases the credit use ratio for the business.
  • Decrease spending – try to reduce how much you spend when on credit.
  • Increase credit limits – see if the provider is willing to do this.
  • Open new credit lines – although it will be counterintuitive for many business owners, whenever you have more credit you get a higher ratio, which is beneficial as long as you do not use the new credit line.
  • Pay bills more often – ratio is kept down since spending does not pile up over an entire month. Try to pay bills at least 2 times every month.

Establish Direct Credit Accounts With Your Suppliers

If you have been working with a supplier for a long time and the payment relationship is good, you can propose a direct credit account. This increases positive payment numbers and your business credit score is increased in the process.

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Directly Add More Positive Payment Experiences To The Report

You need to know that some suppliers and vendors do not share their payment data with the credit-reporting agencies. Even so, you are allowed to manually add trade references. If you can add more positive experiences to the file, the business credit score will automatically be higher.

Delete Collections Negative Accounts

Whenever you have debts that go to collections, you want to use them to increase business credit score. The agency needs to delete negative accounts from credit reports. However, you need to explicitly ask. If you do not do this and you pay debt through collections, the credit score will not be impacted and you will still have negative entries on file.

Negative account history needs to be completely removed for the score to be affected. This is what “pay for delete” refers to. Never pay a collection agency if it does not help to remove these negative accounts.

Final Thoughts

The most important thing at the end of the day is to know exactly what your business credit score is and what affects it. Whenever you can do something to increase the score, you should do it, even if you do not need to make use of the credit score at the moment. You never know when you will need it.