Thought Leader Series: 5 Pointers on Improving Your Business Credit Score


Minyang Jiang

improving your business credit score

Kim Parr is a financial blogger and freelance writer. You can read more about her at Eyes on the Dollar.

A business credit report is an objective measure of how well a company maintains and keeps up with its financial obligations. For small business owners, having a good credit score is imperative. From financing equipment to keeping potential suppliers happy, there are many occasions when a business credit score will be scrutinized.

Read on for some pointers on how to improve your credit rating.

1. Separate Personal and Business Credit

As with income and expenses, it’s important to keep business and personal credit separate. Businesses are rated from zero to 100 with a Paydex score, which is similar to a personal FICO score. Having a score above 75 is necessary to obtain the best interest rates and credit terms.

Be sure to incorporate your business to avoid having personal credit scores be used for business purposes. Once you have business and personal matters separated, it’s time to start building credit.

2. Apply for Credit

Once a business is up and running, apply for a business credit card and line of credit. Although credit limits might be small for growing companies, as you make purchases and pay off balances on time, your credit rating and limit will grow. Make sure creditors report transactions as business trades so your company’s credit can be established.

Remember that applying for credit doesn’t mean a green light for unnecessary spending. Only use credit cards for expenses you’ll be able to pay off monthly, and make sure payments on your line of credit aren’t more than you can afford. Increased interest or penalties for late payments will do more harm than good for your business – and your credit score.

3. Pay All Bills on Time

No matter how big or small a bill, make sure all payments are made on time. Late payments lower your credit rating and raise red flags with potential business associates. If it looks like you might not be able to make a payment by the due date, call the vendor and explain the situation. It might be possible to get an extension or make alternative payment arrangements.

4. Keep Your Debt-to-Credit Ratio Low

Just like with personal credit cards, you never want to max out business credit. Try to use only a small portion of your revolving credit limit. As your business grows, you may need to apply for a larger loan, and it’s important not to already be buried in debt when that time comes.

5. Check Your Business Score Report Often

Business credit reports can be obtained from Experian, Dun & Bradstreet and Equifax. Mistakes do happen, and business identities can be stolen. If you find an error or fraudulent transaction, dispute it. Correcting just one error can do wonders for your credit rating.

Keep in mind that other businesses, suppliers and even customers can order a copy of your business credit report for review. As your business needs grow and change, it’s always important to maintain a good credit rating to obtain the best loan and purchase terms and to keep your company in good public standing.

To learn about our business funding solutions, and how they can help your business thrive, browse our site and contact us!