Why you need a business credit program

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Why you need a business credit program

Published By Janet Gershen-Siegel at April 11, 2018

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Do you know why you need a business credit program? Building business credit means that your company gets chances you never felt that you would. You can get all-new equipment, bid on realty, and cover the company payroll, even when times are a bit lean. This is especially helpful in seasonal businesses, where you can go for calendar months with just hardly any sales.

Given this, you should really tackle building your business 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 cost you a lot more. And no entrepreneur wants that. You need to understand what affects your company credit before you can make it better.

Credit History Length Matters

This is generally the length of time your small business has been using business credit. Of course newer small businesses will have very short credit histories. Though there is not so much you can specifically do about that, do not fret. Credit reporting agencies will also inspect your personal credit score and your very own history of payments. If your personal credit is good, and in particular if you have a somewhat long credit history (that is, you did not just get your first credit card a short time ago), then your consumer credit can come to the rescue of your business.

Of course the opposite is also true– if your consumer credit history is poor, then it will have an effect on your business credit scores until your company and individual credit can be separated.

Do not Enable Your Credit Utilization Rate to Damage Your Company

Your credit utilization rate just signifies the amount of cash you have on credit which is then divided by your total available credit. Lenders in general do not like to see this exceed 30% (so for each $100 in credit, do not borrow on over $30 of that). If this percent is increasing, you’ll have to spend down and work off your financial obligations ahead of borrowing more.

Your Payment History is Important

Overdue payments will have an effect on your company credit score for a good seven years. If you pay your small business (and personal) financial obligations off, as quickly as possible and as fully as possible, then you can make a very real difference when it pertains to your credit scores. Make sure to pay in a timely manner and you will experience the benefits of promptness.

Your Personal Credit can have a bearing on Your Corporate Credit

Are you having an unsatisfactory business year? Then it could wind up on your individual credit score. And in case your firm has not been around for too long, it will directly affect your business credit. Fortunately, you can separate the two by taking measures to split up them. Say, if you get credit cards only for your business, or you open business checking accounts and other bank accounts (or maybe get a business loan), then the credit reporting bureaus will start to address your private and corporate credit separately. Also, ensure to incorporate, or at the very least file a DBA (doing business as) status. You can also pay for your company’s statements with your firm credit card or checking account, and insure it is the small business’s name on the bill and not your own.

The Credit Reporting Bureaus Can Just Plain Get it Wrong

Just the same as every single company out there, credit reporting bureaus such as Equifax and Experian are only as good as their files. If your firm’s name is similar to another’s, or your name is a lot like another business owner’s, there can possibly be some mistakes. So keep track of those reports, and your company report at Dun & Bradstreet, PAYDEX. Remain on top of these reports and dispute charges with records and clear-cut communications. Do not just allow them to stay wrong! You can fix this! And while you’re at, it you should also be monitoring the credit reporting bureau which exclusively handles personal and not company credit, TransUnion. If you do not know exactly how to pull a credit report, do not fret. It’s easy.

Once you find out what influences your small business credit score, you are that much nearer to building better corporate credit.

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