Managing Business Credit Scores in Times of Crisis: Strategies for Resilience

Surviving a financial crisis can be a challenging task for any business. One crucial aspect that takes center stage during these times is your business credit score. While it might not be the hero in a cape, your credit score is pivotal in helping your venture survive trying times like during a financial crisis.

A high credit score will increase your chances of getting secured loans and favorable repayment terms from lenders. Ultimately, it can be the anchor that keeps your business afloat.

If you want to learn how to manage your business credit score during a financial crisis, you’ve come to the right place. In this blog, we’ll explore how you can prevent your score from declining when the going gets rough.

How to Maintain & Build Your Business Credit Score During A Financial Crisis

Here’s how you can keep your credit score in good shape during a financial crisis:

Take Inventory

The first thing you need to do when your business experiences a financial crisis is to learn where you stand financially. Start by listing down your expenses and all the debts that you have to pay off. 

From your list, determine which are essential payments, like bills, credit cards, and loans. Once you know your essentials, look for expenses you can cut back.

This tip is also useful when creating a new budget for your business. Having a list of your essential and non-essential expenses will give you a better idea of what to prioritize on your new budget. 

Pay Off Your Debts

You can either use the avalanche or the snowball method when paying off your existing debts. The avalanche method is where you pay off your most expensive debt first. For example, if you have five credit cards, you have to prioritize the one with the highest interest rate. 

Put as much money as your budget allows into the card with the highest interest rate, then make minimum payments on your remaining four cards. Once you finish paying that card off, use the same strategy for the next card with the second-highest interest rate. 

The snowball method is similar to the avalanche method, but you do the prioritization in reverse. In this case, you pay off the card with the lowest balance. This approach is perfect for you if you want to pay off some of your other accounts. 

Regardless of your chosen method, you must pay your debts on time. Remember that payment history is the most important factor in calculating business credit scores. Your late payments could stay on your report for up to seven years. 

Maintain A Low Credit Utilization Ratio

Credit utilization ratio (CUR) is another important factor that affects your credit score. It’s highly recommended that you keep your ratio below 30%. 

You can achieve a low CUR by making timely payments on your existing credit cards. Aside from this, you can also ask for a higher credit limit from your provider. A higher credit limit will significantly improve your current CUR. 

Monitor Your Reports

Keeping track of your credit reports is one of the best ways to maintain a healthy score during a financial crisis. It helps you dispute any errors on your report and allows you to mitigate any potential problems that could harm your credit score. 

Now, business credit reports are not necessarily free. Two of the three major credit bureaus, Experian and Dun & Bradstreet, do offer free reports. 

D&B offers a free service, CreditSignal, where you can monitor your score. When you sign up, you’ll get alerts whenever your score changes or if someone decides to buy a copy of your report. 

The only downside to getting free business credit reports is that there’s a limit to the information they present. If you want a more comprehensive look at your credit score, you’ll have to pay for a full report.

Why Do You Need to Monitor Your Business Credit Score?

Although monitoring your business credit score has always been important for business owners like you, it becomes even more vital when your venture is going through a financial crisis. Here’s why:

Helps You Make Smarter Choices

Knowing your financial standing is the key to making smarter choices. When you consistently manage your credit score, you can adjust your budget effectively. You’ll learn how to manage your resources better and know which payments to prioritize. 

Protects You From Identity Theft & Fraud

Every year, businesses nationwide lose billions on business identity theft and fraud. Fortunately, you can protect your business by regularly checking your credit report for any unusual activity. 

If you see any fraudulent transaction, you can immediately report it to the credit reporting agency and have it corrected.

Preserves Your Borrowing Power

Maintaining a healthy business credit score will help preserve your company‘s borrowing power. 

With a strong borrowing power, you can easily get loans or credit facilities whenever your business needs them. Think of it as a lifeline that you could use during emergencies. 

Additionally, being creditworthy can enhance your supplier relationships. You’ll be able to get more favorable credit terms when your supplier knows your business is creditworthy.  

Builds Credibility

Actively monitoring your credit scores shows creditors that you’re committed to meeting your financial obligations. Knowing your score will also allow you to negotiate with creditors effectively. 

For example, if you’re having trouble making timely payments, you can contact your creditors and try to work out a new payment arrangement with them.

Helps You Plan For The Long Term

Now that you know what your business credit score is, you’ll be able to make plans for the long term. You’ll know what borrowing habits to avoid and mitigate any issues that could be a major problem in the future. 

Protect Your Score Today

If you’re having trouble understanding and managing your credit score, look no further than NCH. 

NCH is one of the leading business formation service providers in Nevada. Our team of business specialists has helped countless small business owners build and manage strong credit scores. 

They’ll help you assess your credit reports and work with you to create comprehensive credit management strategies. With their guidance, you can enhance your company’s creditworthiness in no time. 

To learn more about our credit-building services, visit our website here or call us at 1-800-508-1729.

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.