Building and maintaining good credit for your business is a nonnegotiable factor in obtaining loans and operating successfully. You can take several steps to help solidify your business’s financial security.
Here are 8 tips to boost your business credit score, positioning yourself for long-term success:
- Refinance existing loans
Refinancing existing loans is a helpful approach to improving your credit because it can provide a lower interest rate, making a debt easier to pay off in full. The higher your credit rating, the easier it is to refinance your loan at a lower interest rate.
- Always make payments on time
Making payments on time is critical to building and maintaining a strong credit score. Late payments can quickly hurt your credit and, on top of that, incur penalty fees, which add to your existing balance. Making payments on time or even scheduling them early is one of the best ways to ensure that your credit score stays strong.
- Limit opening new accounts
After you’ve opened the credit card account that you need for your business, try to avoid opening additional accounts, unless absolutely necessary. New credit applications can negatively affect your credit, so it’s best to limit or avoid new applications. There’s rarely a need for multiple cards, so decline offers and incentives for new accounts, and keep your credit rating steady.
- Keep your old accounts
It might feel logical to close older accounts when you have paid them off in full, but there are benefits to keeping these accounts open. Older accounts reveal your credit history, and your older accounts demonstrate a longer-standing credit history, as well as debts you have paid off—both of which are favorable aspects to potential lenders. Before you rush to close an account, consider how it may benefit your credit rating.
- Keep business and personal finances separate
Categorize all your accounts appropriately to avoid any confusion between business and personal finances. Open business accounts using your Employee Identification Number instead of your Social Security Number. Aside from it being a best practice in business, maintaining distinctions between your business and personal accounts helps build your credit in both areas and can prevent a negative incident on one side from affecting the other.
- Address problems proactively
Sometimes things go wrong, or we make mistakes in our businesses. Missing one payment is not the end of your good credit, but even a single instance can be made less damaging by handling it promptly and directly. For instance, if you know that a payment is going to be delayed, call your lender ahead of time to address it, and explain what occurred to cause the problem. Taking the time to handle a challenge like this responsibly can discourage a lender from reporting your late payment immediately, giving you a cushion of time to make the payment before it negatively affects your credit score.
- Stay on top of your business and personal credit
Maintaining a close eye on your business credit score helps you identify any issues and ensures that your report is accurate. Consistent monitoring of your credit also helps you learn to track how different habits or events are affecting your score. Keeping a close eye on your personal credit report is also helpful when lenders or investors are reviewing your report, so that you are positioned to address any questions. Many lenders will look at both your personal and business credit scores, so staying on top of both is always best.
- Fix any errors promptly
We all play a role in the health of our credit. As you monitor your credit report, there’s a chance that you may encounter errors or fraudulent activity. If ignored, these items will continue to hurt your credit score and can lead to major financial problems. If you happen to find errors or questionable items on your credit report, work to fix them as soon as possible, and make sure the updated data get to any potential or current lenders immediately. Our trusted lending partner Fundation considers more than just your business credit score when reviewing small business loan applications. Fundation is dedicated to providing outstanding customer support throughout the life of your loan. Learn more today at www.fundation.com.