How to Improve Your Business Credit Score

How to Improve Your Business Credit Score

Having a good business credit score is essential for any company that wants access to financing and better terms from suppliers. Much like your personal credit score, your business credit profile plays a big role in determining risk and dictating the terms and interest rates you’ll be offered. Fortunately, there are several steps you can take to build and improve your business credit score over time.

Check and Monitor Your Business Credit Reports

The first step is to check your business credit reports from the major business credit bureaus like Experian, Equifax, and Dun & Bradstreet. You can request free copies of your reports annually from each bureau to see what’s being reported. This allows you to spot any inaccuracies and dispute them if needed. Be sure to check all three reports, as the information reported can vary between bureaus.

You’ll also want to monitor your business credit reports regularly, such as every three to six months. This frequent monitoring allows you to catch any reporting issues quickly and take corrective action before they damage your score further. Services like Nav offer free business credit monitoring that can track changes and alert you of any new activity.

Pay All Bills On Time

Payment history makes up the largest percentage of your business credit score calculation. When you pay your business bills and debts on time, it gets reported to the credit bureaus and helps demonstrate that your business is reliable and creditworthy.

Be sure accounts like business credit cards, lines of credit, and loans are paid at least on or before the due date every month. If you occasionally pay late, ask your lenders if they will remove those late payments from your credit reports rather than letting them damage your score.

Use Business Credit Cards Responsibly

Business credit cards can be useful for managing cash flow, accessing short-term financing, and building credit. But maxing out your credit cards or carrying high balances can hurt your credit utilization rate and drag down your score. Experts recommend keeping your credit card balances below 30% of the credit limit.

If possible, pay off credit card balances in full each month. If you must carry a balance, pay more than the minimum payment so you pay it down aggressively over time. Avoid opening too many new credit cards at once, as this can lower your average account age which also factors into your score.

Build Credit History

Both the length of your credit history and the number of total accounts you have play a role in your business credit score. The longer you maintain accounts open and in good standing, the more it demonstrates the reliability of your business over time.

Consider opening new credit accounts like small lines of credit or store accounts periodically so you continue building the depth of your credit history. Just be sure to make all payments on time and keep balances low on any new credit accounts.

Correct Inaccuracies

Errors can happen, even with business credit reports. If you spot any negative information that is inaccurate or out of date, you can dispute it with the credit bureaus. Work through the dispute process to submit evidence proving the inaccuracy, such as proof of on-time payments or resolved tax liens.

The credit bureaus are required to investigate dispute claims and correct inaccurate information per Fair Credit Reporting Act guidelines. Persist with your disputes until the bureaus make needed corrections.

Add Positive Information

Too little information about your business activities being reported can also limit your business credit scores. Actively add more accounts and positive payment information to your business reports over time.

Options like small bank loans, credit builder business loans, and store credit accounts can help add more positive accounts to your profile as you make on-time payments. Just be sure to keep credit utilization low as you add new accounts.

Use a Guarantor

If you have an established separate business, consider using it to guarantor credit for your newer business. This puts the better credit profile of the established business on the line to help the newer business qualify for financing and build its score through on-time payments.

A guarantor can help you access credit cards, lines of credit and loans that can then be paid on time to build positive payment history under your newer business’s name and tax ID number.

Wait for Negative Information to Age

Past credit mistakes can negatively impact your business credit profile, but the damage lessens over time as the accounts age. Most negative information stays on your business credit reports for around 3-7 years depending on type.

Pay off any past-due balances or collection accounts, then continue building positive payment history going forward. As the older negative items age, their damage on your score will dissipate as long as you continue paying all current accounts on time.

Be patient and persistent to demonstrate you’ve fixed past issues and now manage your business credit responsibly long term.

Resources

For more information on improving business credit, check out these additional resources:

• Reddit Thread on Disputing Inaccuracies
• SBA Guide to Business Credit Scores
• NerdWallet’s Tips for Better Scores

By monitoring your reports frequently, paying bills on time, keeping credit utilization low, disputing errors, and building your history over time, you can improve your business credit score. Be persistent and it will pay dividends in better loan terms for funding growth.