If you have a business credit card or have had a business loan, then your company has a credit score. The score is a measure of your company’s creditworthiness, and it is usually accessible to the public.
Calculation of Credit Score
Credit bureaus have different ways of calculating it, but the common determinants include:
- Credit lines opened in the past six months
- Credit lines applied in the past nine months
- Years in business
- Payment history of the past 12 months
- Number of delayed payments
It is essential to understand these indicators to be able to improve your business credit.
Importance of High Scores
A high score gives you an upper hand in receiving business loans and financing. Also, vendors and suppliers are most likely to work with companies that have a good score.
Ways to Build Better Credit
You can apply these tips to improve your creditworthiness.
1. Open a Business Bank Account
Opening a business bank account separates your company assets from your assets. It helps you to protect personal assets from business liabilities.
2. Make Your Business a Separate Legal Entity
Your business must either be a corporation or a limited liability company (LLC) to get a business credit. You should ensure your business is a separate legal entity to protect yourself from business liabilities.
3. Use Your Business Bank Account For Business Expenses Only
Be careful not to pay your personal expenditures using the business credit card. This will affect you negatively in a legal dispute.
4. Pay Debts on Time
Making timely payments and keeping up with them will save you from overspending. Use various tools to stay up to date with your payments. Sign up for auto-pay tool to ensure your bills are automatically deducted from your bank account. You can use a bill-pay reminder tool or add your bills into your phone calendar or reminder software. Also, consider scheduling a time to pay all your bills.
5. Have a Business Credit Card
Once you have mastered these tips, you are ready to take your credit card. Always pay some expenses using money that you already have, and watch your credit build faster.
Fixing Your Credit
No need to worry if you have a low credit score. First, check your business credit with the three major bureaus: Experian, Equifax, and Transunion. Then, look for any mistakes and contact the credit bureau for corrections.
It is vital to take care of outstanding debts and make smart financial planning. Use this guide to improve your credit faster.