The credit rating of your business is the most vital tool for judging its financial health. The business credit bureaus rates businesses on a scale of 0 to 100 for determining its creditworthiness. At some point in time, every business needs to get a loan for scaling its operations. When you apply for a business loan using your employer identification number, the creditors will be able to pull out information about your business credit score. Sure, there are loans for entrepreneurs with bad credit. But to be eligible for quality business loans, you have to focus on improving your business credit ratings. Here are some helpful tips to increase your business credit ratings.
Why Does Your Business Need A Good Credit Score?
It is advisable that entrepreneurs give equal attention to maintaining a good personal and business credit rating. New entrepreneurs and startup owners can get a small to medium sized loan by the strength of a high personal credit score. However, to secure a large loan for scaling, you must have great business credit rating. If you take an unsecured loan on your name and your business fails to take off, you will have to announce personal bankruptcy. This will further degrade your credit ratings. In contrast, improving your company credit score rating will help you in getting best interest rates and continue growing your business.
Always Make Your Payments On Time
The key to maintaining a high credit rating is making all your payments on time. These payments include not only business payments but also personal loan and mortgage payments. Although a payment that is late by a couple of days will not affect your credit score tremendously, still it is a good habit to clear 100% payments within the due time. With on-time payments, your credit ratings will most likely be excellent.
Keep A Tab On Your Personal and Business Credit Reports
Many small business owners are unaware about the presence of their business credit reports. If you have received a unique Employee Identification Number, then it is time to review your business credit reports. While reviewing your business report, take note of any false information and dispute it to have it removed. This credit due diligence will quickly improve your credit score. You can use well-reputed credit rating agencies like Equifax and Experian for tracking your business credit records.
Take Proper Action For Correcting Mistakes
As mentioned in the previous paragraph, you can dispute the wrong information in your business credit report. Small mistakes like a wrong address or date of payment can completely change your business credit score. To make the change, inform the credit agency which has created the credit report and ask them to update it. Just in case, keep documents in support of your claims ready. You may have to submit them to the credit agency for proof. Additionally, providing proper business licenses, registrations and other documents can also affect your business credit score positively. If any mistakes are present, increase your business credit ratings by being proactive.
Borrow From The Right Lenders
If you are more concerned with building your credit than fixing an already bleak situation, this is the perfect solution for you. Make sure that you are borrowing any business funding from lenders that report to credit bureaus. It is much easier to ask friends, family or investors for money. However, doing so will not help to build your business credit. Small business loans from reporting institutions will help to give your business credit rating a boost, as long as you pay your bills on time every single month. If you are able to guarantee your ability to make timely payments down the line, definitely borrow from a lending institution that will report to a credit bureau.
Get Started With Vendor Trade Lines
Sometimes it can be difficult to establish business credit at all. In these cases, start with a business trade line. These are lines of credits established with vendors. Your vendors have the option of reporting that trade line account to the credit reporting agencies for business purposes. Although there is a chance that vendor does not report your account, it could end up helping establish or improve credit for your business in the long run. Ideally, if you have good relationships with your vendors and suppliers, their credit relationship should help the agencies increase your business credit score.
Keep in mind, your business credit ratings determine your eligibility for business loans and low interest credit cards. If possible, personal and business credit records separate and in check. To have excellent credit ratings on both accounts, pay off your credit card accounts and keep your debts low. To ensure a healthy flow of payments, you might want to check the credit ratings of any large clients.