Your business credit score is one of the items that small business owners need to be aware of and monitoring at all times. If your score isn’t where you want it to be, what are your options for improvement? Are there business credit tips that you can follow to start moving your score in the right direction? There definitely are. Knowing those tips, and following them with some help from your accounting team can help set your business on the right path. Before we explore what business credit tips you can follow, let’s look at why your business credit score is important.
Business Credit Scores
Similar to personal credit scores, business credit scores provide a snapshot of a business’s creditworthiness to lenders, vendors, potential investors and more. These credit scores help these other organizations assess the risk of extending credit or doing business with the company. Businesses with better credit scores are often able to secure better terms and rates and borrow money at lower costs. Like personal credit scores, there are multiple credit rating agencies that do scoring, including Dun & Bradstreet, Experian and Equifax.
Business Credit Tip #1: Pay bills on time
Consistently paying bills on time is one of the most important factors in determining a small business credit score. Late or missed payments can have a significant negative impact on a business credit score. To improve a business credit score, it’s important to make all payments on time and in full. Setting up automatic payments or reminders can help ensure that payments are made on time. Some vendors will even offer discounts for early payment, saving you money and boosting your credit score at the same time.
Business Credit Tip #2: Monitor credit utilization
Credit utilization, which is the amount of credit a business is using relative to its available credit, is another important factor in determining a small business credit score. To improve a business credit score, it’s generally recommended to keep credit utilization below 30% of the available credit limit. This can be achieved by paying down existing balances, requesting credit line increases, or applying for new credit if needed.
Business Credit Tip #3: Monitor credit reports for errors
Small businesses should monitor their credit reports annually for errors or inaccuracies that may be impacting their credit score. If any errors or inaccuracies are found, the small business should dispute them with the credit reporting agency. Correcting errors or inaccuracies can help improve a business credit score.
Business Credit Tip #4: Request credit increases when times are good
Small businesses should request credit line increases when times are good, not bad. This is an easy one to forget about, since you don’t need more credit when things are going well. Lenders want to see good financials, but you won’t have good financials when you’re in trouble and need cash.
Working with Haworth & Company
By following these tips, small businesses can improve their credit score and increase their chances of obtaining credit, securing favorable terms, and building a strong reputation within their industry. It’s important for small businesses to monitor their credit score regularly and take steps to improve it if necessary. And by working with a professional, small business-focused accounting team like Haworth & Company, you can get the support and insight to know where you stand, stay out of trouble, and maximize your opportunities. Contact us today to get started.
Disclaimer: This blog content is for general informational purposes only, should not be considered professional advice, and does not establish a client relationship. Haworth and Company is not liable for the accuracy of this information or the content of external links. Please use this information at your own risk, ensuring it suits your specific needs, and consult with a certified tax professional for your own personalized guidance.
