3 Factors that Can Devastate Your Business Credit Scores

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3 Factors that Can Devastate Your Business Credit Scores

Published By Janet Gershen-Siegel at March 14, 2018

bank credit score 1000x480 - 3 Factors that Can Devastate Your Business Credit Scores>

These 3 factors can devastate your business credit scores. Do not let anything like this happen to you! These are easily preventable. Save your business credit scores!

Uh, oh. You tried to build a commercial credit score without truly thinking it through and taking into consideration what affects small business credit rating. Let’s take a look at 3 factors can devastate your business credit scores — and how to fix them. And you do have to fix them, because this is what affects a business credit rating.

3. You Used More Credit Than Your Company Could Handle

Credit can be intoxicating. Take a look at all that free cash! Look at all the important things your company needs!

Wait; wait, whoa, time out!

It is not free cash. It’s a loan, really. All credit is whether it’s commercial or consumer. If you have gone on a wild credit spree, your credit rating is going to be affected. How? Delinquency.

When you are that much in hock, it may be tricky to stay on top of the payments. Late payments will directly and adversely impact your business credit score. So be responsible with credit. This isn’t gambling; it’s your livelihood and the livelihood of anyone who works for you.

2. You Didn’t Stay on Top of Your Credit Scores or Dispute CRA Mistakes

While credit reports aren’t exactly page turners, you should still be staying on top of them.

Don’t have time to read through credit reports? Then use a monitoring service. Experian offers Business Credit Advantage. PAYDEX has Credit Reporter. And Equifax has Business Credit Monitor. If you prefer a free version for credit alerts, you can try CreditSignal.

The point of all of that monitoring is to spot errors and fix them. If any one of your credit reports has mistakes, then you must get on top of that, without delay. Disputing credit report errors generally means you send a paper letter with copies of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the originals– always send copies and retain the originals. Precisely detail any charges you dispute. Make your dispute letter as crystal clear as possible. Use certified mail so that you will have proof that you sent in your dispute.

Contesting an error quickly means your credit reports will be corrected more quickly.

1. You Didn’t Separate Your Company and Individual Credit (or you didn’t do so quickly)

The longer and more intimately your personal and business finances are entangled, the more likely it is that credit reporting agencies will take your consumer credit into account when looking at your company. This doesn’t give your company a chance to make its own credit ‘name’, as it were. When you examine your company credit score vs personal credit score, they should be different.

Paying off your business’s charges with personal charge cards or checks; not getting a separate IRS EIN number for your company; and not putting your business’s bills in the company’s name can all aggravate this problem. And the Internal Revenue Service will probably have something to say about your business not having its own identification number.

So to repair this, your mission is as follows:

  • Get an EIN first. You can apply online after you determine your eligibility (that is, if your business is located within the US, etc.)
  • Visit your local bank and open a small business banking account
  • Contact local vendors and get your company’s bills put into the company’s name. While you’re at it, see if you can start to build trade credit with them
  • Always pay the business’s bills with your business accounts or credit

Save your business credit scores!

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