Published By Janet Gershen-Siegel at March 1, 2018
So business Credit made simple? Yes, really! We can take all of the mystery out of understanding and building business credit.
Building business credit means that your company obtains opportunities you never knew you would. You can get brand new equipment, bid on real estate, and cover the company payroll. And you can do this even when times are a bit lean. This is especially helpful in holiday firms, where you can go for calendar months with simply low sales.
As a result of this, you need to focus on building your company credit. Enhance and maintain your scores and you will have these possibilities. Do not, and either you do not get these chances, or they will set you back you a lot more. And no company owner wants that. You should know what affects your business credit before you can make it better.
This is in essence the length of time your firm has been working with business credit. Needless to say newer companies will have very short credit histories. Though there is not a lot you can specifically do about that, do not fret. Credit reporting agencies will also scrutinize your personal credit score and your own history of payments.
If your individual credit is excellent, and in particular if you have a somewhat long credit history, then your consumer credit can come to the rescue of your business.
Normally the reverse is also true– if your private credit history is poor, then it will affect your business credit scores until your company and consumer credit can be separated.
Late repayments will influence your business credit score for a good seven years. If you pay your company (and personal) debts off, as quickly as possible and as fully as possible, then you can make a very real difference when it comes to your credit scores. See to it to pay without delay and you will reap the benefits of promptness.
Are you having a bad business year? Then it could wind up on your personal credit score. And in the event your company has not been in existence for too long, it will directly have an effect on your business credit. That being said, you can unlink the two by taking measures to unlink them. As an example, if you get credit cards or loans exclusively for your business, then the credit reporting bureaus will begin to treat your consumer and company credit independently.
Also, make sure to incorporate, or at least file a DBA (doing business as) status. You can also take care of your company’s expenses with your firm credit card or checking account, and insure it is the business’s name on the bill and not your own.
Credit utilization rate is how much you have on credit, divided by overall available credit. Lenders normally do not wish to see this exceed 30%. So for every $100 in credit, do not borrow on more than $30 of that. If this percentage is climbing, spend down and work off your debts ahead of borrowing more.
Just like every organization, credit reporting bureaus like Equifax and Experian are only as good as their records. If your firm’s name is similar to another’s, or your name is a lot like another’s, there can possibly be some errors. So keep an eye on those reports, and your small business report at Dun & Bradstreet, PAYDEX.
Stay on top of these reports and dispute charges with documentation and clear-cut communications. Do not just let them stay wrong! You can fix this!
And while you’re at, it you should also be checking the credit reporting agency which just handles consumer and not corporate credit, TransUnion. If you do not know exactly how to pull a credit report, do not fret. It is easy – just Google the appropriate CRA to find the right links.
Once you find out what affects your company credit score, you are that much closer to creating enhanced corporate credit. Business credit made simple indeed!