How to Repair Your Business Credit Score
Just like individuals, businesses carry a credit score. It’ based upon many of the same criteria, like the amount of debt your company carries, your payment history, and how frequently you seek new sources of credit. There are a few key differences, however. Your trade experiences, which are the records of your purchases from vendors, factor in. Also, the maximum business score is either 100 or 300, depending on the reporting company.
If your business falls on hard times or overextends its credit, your credit score will lower, making it more difficult to secure funds for projects or necessities. Fortunately, credit repair is possible over time, and as little as a year can make a big difference if you follow these guidelines.
Pay Your Bills Early (Or At Least on Time)
Hopefully, this first step is obvious. Just like your personal credit score, the best and perhaps the easiest way to get on the road to credit repair is to pay your bills on time. If you can pay early and always pay more than the minimum balances, so much the better!
Have a Good Credit Mix
For businesses, a good credit mix helps achieve a good credit score. While having and using a business credit card is the best way to establish and build credit, if credit repair is the goal, a business should be carrying their debt in a healthy mixture of places. Generally, bank loans, lines of credit, and business credit cards work well together in this scenario.
Understand and Maintain a Good Credit Utilization Ratio
It may seem a little strange, but credit monitoring companies also make decisions based upon how much of your available credit you use. This is known as the “credit utilization ratio.” When working towards credit repair, a decent rule of thumb is to try to use around 25% of available credit at any given time.
Keep an Eye on Your Business Credit Score and Make Sure Changes are Accurate
Finally, it’s important to realize that credit monitoring companies can make mistakes. Those mistakes can cost you a lot of money if they’re not caught and reversed. You must diligently monitor your business credit score and ensure that changes are based on things that have happened. If you see a sudden dip that isn’t connected to anything, contact the agency and report it immediately.
Rebuilding a business credit score isn’t a walk in the park, but it’s essential to running your company. Follow these steps, and you’ll get to your goal more quickly.