How to Fix Your Business Credit Score
It is a vicious cycle in which many small businesses and startups find themselves trapped. To grow the business, they need working capital to fund the business, but leveraging too much cash makes paying the bills difficult, especially when the unexpected happens. In turn, that can damage a good business credit score, making it difficult to raise new funds, worsening the business’s credit rating, and eventually requiring a good credit repair plan.
However, not all is lost. There is a way you can escape the vicious cycle. By following a few simple rules, businesses and business owners can take charge of their own credit repair.
- Keep an Eye on Your Credit
Businesses carry a credit score in much the same way a person does. How a business manages its debt directly affects that score. If a business pays its bills on time and keeps a low debt-to-income ratio, its credit score should rise. Several credit-reporting agencies determine that number based on those factors and the information it receives from creditors. Your score can vary between agencies.
Mistakes happen, however, and lenders can report the wrong information to the credit reporting agencies. Take time to purchase your business’s credit report from each agency and comb through it to make sure all the information is correct. If you find a discrepancy, work with the lender to correct the information. If that does not work, report the issue with the credit-reporting agency. Cleaning up your company’s credit report should also lift your score.
- Rework Your Budget
If your company is carrying too much debt, it will certainly cripple its credit score. To pay off debt as fast as possible, look for ways to trim your budget and reduce expenses. That may come from your marketing budget or the amount of inventory you keep on hand. You may even try to reduce staff hours and run leaner.
- Be Careful with Credit Cards
Conventional wisdom suggests credit cards can only damage a credit score, but that is not true. Using a credit card and pay the debt in full each month will help you establish good credit and lift your company’s credit score. Try not to carry a balance for long, however. If you do, make sure it is no more than 30 percent of the credit available to you.
Remember to monitor your credit report, run lean and efficiently and use credit wisely. If you follow these steps, you will set your company on the right credit repair path.