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Six Steps to Building Your Business Credit Score

May 26, 2021
Business
Credit score

Your business credit score will open up – or close – many opportunities for your business. Trade credit and financing opportunities are a couple of the most common of these opportunities for which having a strong business credit score is critical. Simply put, a higher credit score gives you access to more money.

However, having a strong business credit score does not just affect your access to credit and financing. Any party – such as suppliers or other key partners - could take it into account when deciding to do business with you. In fact, unlike consumer credit scores, they do not need to have any special reason or permission to check it. So it is very important to have a strong business credit score.

If your business credit score is not good, be optimistic and start taking action. There are several concrete steps that you can take to improve your business credit score.

Here are 6 steps you should take to improve your business credit score:

1 . Start with Knowledge

You may ask yourself, "What is my business credit score?" Knowledge is power. The very first step that you should take is checking your business credit score and getting a report or two from the major credit reporting agencies. Some of the major ones are Experian, CreditSafe, and Dan & Bradstreet. There are also other services that you can use to get this information.

While you have to pay for most services that you can use to check your business credit score, Credit Push is a new service that can help you monitor and improve your business credit score for free. So now you have no reason not to check your specific business credit score.

Bear in mind that there are multiple versions of your business credit score – but they rely heavily on many of the same factors. So pulling just one or two of these scores should get you going in the right direction, regardless of what report your lender or trade partner ends up looking at.

Only once you know what potential lenders and trade partners see when they look at your report, will you know what you should focus on fixing. Otherwise you could end up putting in a lot of resources trying to fix your score, without making much progress.

2. Check for Accuracy

Once you have a copy of your business credit score, read through it very carefully. Look for errors and entries that need to be updated. It is not uncommon for inaccurate information to be in these reports, weighing down the resulting score. Call the agency as soon as possible to dispute any such information that you find, and follow their dispute resolution processes. It is in their interest also to make sure that the reports that they provide contain accurate and therefore useful information.   

Removing or updating inaccurate information from your file is essential to getting the highest business credit score possible.  

3. Build Your Payment History

Sometimes it does not hurt to remind yourself of the obvious – make sure to pay your bills on time. Credit card bills, supplier account balances, business loan payments all need to be made in a timely manner. This is the most obvious way to build your payment history, and it is also the most important way.

The next three steps all relate to decreasing your credit utilization ratio, a metric that shows how much of your business’s credit lines are you using. A low credit utilization is what to aim for. Maxing out all of your business credit cards is a surefire way to have a poor business credit score.

4. Increase Your Tradelines

Call your credit card companies. Ask them to increase your credit limit. Voila – without paying off a dime, your credit utilization ratio just decreased. This step often just takes a few minutes and is one of the best ways to build business credit quickly. Just do not immediately go spend the increased credit!

In the same vein, make sure you do not close tradelines just because they are paid off. This will increase your credit utilization ratio, as you will have less access to credit showing up on your report, and ultimately your business credit score will take a hit.

5. Pay Off Balances

Here is another way building your business credit can be fairly straightforward: Besides simply paying the minimum balance due, you could pay off some or all of the remaining balances on your trade lines. This will also decrease your credit utilization ratio and improve your business credit score.

There is a special strategy for you to use if a past-due account has gone to collections. It is called Pay For Delete. This is when you demand that the debt collector agree to erase the account from their credit report if you agree to pay off the account. Otherwise, paying off the account will not help your credit score.

6. Open New Tradelines

Still wondering "how to build my business credit fast?" Another way to decrease your credit utilization ratio and improve your business credit score is to open new tradelines. However, not all businesses submit information to the credit agencies. Opening lines of credit with suppliers that specifically report lines of credit will help your business credit score. Do not forget to pay them in a timely fashion.

It is common to start looking at how to improve your business credit score only when you need a loan or start experiencing problems opening trade lines. Consider routinely checking your business credit score and reports, at least once a quarter, and taking appropriate actions on an ongoing basis. Your business credit score is a key indicator of your company’s financial health, and future success. Take care of it, and your company surely reap the benefits!

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