Published By Janet Gershen-Siegel at December 17, 2017
Building business credit means that your company acquires opportunities you never considered you would. You can get brand new equipment, bid on realty, and deal with the company payroll, even when times are a bit lean. This is particularly helpful in seasonal business enterprises, where you can go for several months with solely minimal sales.
Due to this, you should focus on developing your company credit. Enhance and maintain your scores and you will have these opportunities. Do not, and either you do not get these chances, or they will cost you a lot more. And no company owner wants that. You will need to recognize what affects your small business credit before you can make it better.
Your credit utilization rate just shows the amount of cash you have on credit which is then divided by your overall available credit. Lenders generally speaking do not wish to see this go above 30% (so for every $100 in credit, do not borrow on in excess of $30 of that). If this percentage is increasing, you’ll need to spend down and pay off your debts ahead of borrowing more.
This is in essence how long your business has been making use of company credit. Naturally newer firms will have brief credit histories. While there is not a lot you can specifically do about that, do not panic. Credit reporting bureaus will also review your personal credit score and your very own history of payments. If your individual credit is good, and in particular if you have a relatively extensive credit history (that is, you did not just get your first credit card fairly recently), then your personal credit can come to the rescue of your corporate.
Obviously the opposite is also right– if your private credit history is bad, then it will have an effect on your business credit scores until your company and personal credit can be split.
Late repayments will have an effect on your company credit score for a good seven years. If you pay your business (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. Ensure to pay on schedule and you will enjoy the rewards of promptness.
Are you having a bad business year? Then it could end up on your individual credit score. And just in case your small business has not been around for too long, it will directly impact your company credit. That being said, you can unlink the two by taking steps to separate them. For example, if you get credit cards solely for your small business, or you open business checking accounts and various other bank accounts (or perhaps get a business loan), then the credit reporting bureaus will start to address your consumer and small business credit on an individual basis. Also, be sure to incorporate, or at least file a DBA (doing business as) status. You can also pay for your company’s invoices with your business credit card or checking account, and make sure it is the company’s full name on the bill and not your own.
Just the same as every company around, credit reporting bureaus like Equifax and Experian are only as good as their records. If your business’s name is like another’s, or your name is a lot like another company owner’s, there can possibly be some mistakes. So keep track of those reports, and your company report at Dun & Bradstreet, PAYDEX. Stay on top of these reports and dispute charges with records and clear communications. Do not just allow them to stay incorrect! You can fix this! And while you’re at, it you should also be checking the credit reporting agency which only handles personal and not business credit, TransUnion. If you do not know exactly how to pull a credit report, do not worry. It’s easy.
Once you know what influences your corporate credit score, you are that much closer to building enhanced corporate credit.