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Seven Essential Tips for Improving Your Business Credit Score

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Maintaining a high business credit score is essential in today’s competitive market. It helps you gain more capital and opens your doors to more long-run business opportunities.

June 7, 2023
Author: NCH

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There’s no denying that it can do wonders for growing startups. However, improving your venture’s credit score is challenging, especially if you don’t know where to start. 

If you’re wondering how to improve your business credit score, you’re in the right place. In this blog, we’ll explore seven tips on how to boost your credit score. 

Seven Tips For Improving Your Business Credit Score

You can boost your business credit score in plenty of ways. Here are a few examples: 

Check Your Credit Score

The first thing you need to do when improving your business credit score is to check your score. 

Business owners have every right to see their business credit reports. All you need to do is contact major credit reporting companies and ask them for a copy of your report. 

Some institutions offer free copies. However, we recommend paying for a comprehensive copy of your report to get a firm grasp of the current credit situation of your company.

Open A Net 30 Account

Having a Net 30 account allows you to buy goods and repay them within a 30-day term. What differentiates these vendors from other lenders is that they report your account as a tradeline with major business credit bureaus. 

Most business owners assume that all lenders report to bureaus. However, this isn’t always the case. Some vendors don’t report to them, which makes building a business credit profile harder for first-timers. 

If you need an established credit line, you need to open at least five Net 30 accounts. 

Reduce Your Utilization Ratio

Your credit utilization ratio is also one of the factors credit report agencies look into when calculating your credit score. This number shows how much credit you have used compared to how much you still have left. 

Some lenders want to ensure you’re not maxing out your credit line. The more credit you have left, the better. We suggest you keep your ratio under 15%

How can you reduce your utilization ratio? For one, you can limit your spending. Remember, lenders use this number to see how responsible you are in handling your money.

You can also ask your provider to increase your credit limit. For instance, your business credit card’s ratio will decrease since its account has a higher balance than before. 

Maintain Good Repayment Habits

Exercising proper repayment habits means making sure that your bills are paid on time. Whether you’re paying a supplier or a lender, prompt payments show that you can manage your debts properly. 

It’s also worth noting that late payments will be recorded on your profile. For example, your company receives a county court judgment (CCJ) for not paying its credit card for months. 

In that case, you have up to 28 days to pay everything back. If not, your debt will appear on your credit profile for six years. Having a debt record on your profile could drag your credit score down and make applying for a business loan hard.

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Don’t Apply For A Loan Unless Needed

Some credit bureaus see good cash flow as a sign of creditworthiness. For example, Dun & Bradstreet (D&B) has a failure score that measures the likelihood of a business going bankrupt within 12 months. 

If they give you a rating of 5, there’s a high chance your business will fail. This could drag down your overall credit score since there’s a possibility that you won’t be able to repay your loans.

Moreover, when lenders see that you’ve been applying for multiple loans within a short period, it indicates that your startup is struggling financially. Your company is probably not making a lot of money, that’s why you need more credit. 

We also recommend you pay beyond the minimum amount due or pay your loans in full if you can. This will help lower your balance, resulting in lower interest rates. 

Separate Your Business & Personal Expenses

When you start building your business credit line, you must avoid using it for personal purchases. Doing so causes your financial records to become disorganized, which could affect your overall score.

Instead, you must ensure that your business credit card will be strictly used for your startup. We also recommend avoiding using your personal credit cards for business expenses. 

Correct Errors

It’s not uncommon for businesses to find errors in their credit reports. If you find any inaccurate information on yours, you need to correct it immediately. 

You can dispute the error by calling the credit reporting agency where you got your report. Bring any document that could support your dispute and get the error removed or corrected.

These small mistakes could leave a big dent in your score, so you must look for any inaccuracies in your report. 

Can I Still Apply For A Loan If I Have A Bad Credit Score?

You can still get loans even with a low business credit score. However, the downside to this is that you won’t be able to get a better deal from lenders. You won’t be able to ask for lower interest rates or more flexible repayment schedules. At its worst, some vendors may ask you to provide a personal guarantee to secure your loan.

A great business credit score will allow you to get the most out of your loans and credit cards. If you need help improving your business credit score, look no further than NCH. 

NCH’s credit experts have worked with thousands of businesses in Nevada. We’ve helped them boost their business credit scores using solutions developed specifically for their needs. 

Whether you want to understand your credit reports better or want a credit launchpad, NCH is here for you. 

When you work with us, you can rest easy knowing that your finances are in capable hands. Learn more about our business credit and profile services by visiting our website or calling us at 1-800-508-1729 today.

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.

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