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Don't Take Your Business Credit Score Lightly

Adam Groff

September 28, 2015

Your small business is only as strong as its credit score, which is why you should do all you can to make sure your score is excellent.

Fortunately, there are a number of ways to improve your credit score as well as your business's reputation.

With credit counseling in mind, here are a few tips for improving your business's credit score:

Establish Your Business as a Corporate Entity

Whether you're just starting up your small business or you've been in business awhile, establishing yourself as a corporate entity as soon as possible is a wise move. The sooner your business activities are reported to the credit bureaus, the sooner you can start building a healthy credit score for your business.

Using your personal credit to get the ball rolling with your business is sometimes unavoidable, but don't get comfortable with this scenario.

As soon as you have an employee identification number associated with your business, start using it instead of your social security number while acquiring loans.

Likewise, once you establish your business, make sure your finances are reported to the proper credit agencies.

Equifax and Experian are used for both personal and business credit scores. However, Dun & Bradstreet is solely used for business credit reporting.

Don't Close Unused Accounts

When you close out small business accounts, it reduces the amount of credit available to your business. This can drastically reduce your credit score with each account you close.

The article "Thought Leader Series: 5 Pointers on Improving Your Business Credit Score" mentions the importance of applying for credit to improve your score.

Along with this pointer is keeping all lines of credit and accounts open, even if there is no balance present.

Doing so reflects positively on your overall business credit score and it also gives you the opportunity to spread other balances across your unused accounts.

Communicate with Vendors

Making timely payments to your vendors and business suppliers is a great way to improve your credit score. However, not all vendors report positive payment histories to credit reporting bureaus.

That's why it's important to communicate with your vendors and make sure they're reporting your timely payments.

On the flip side of the coin, vendors and suppliers are far more likely to report negative payments to credit reporting bureaus.

If you do happen to miss a payment, make sure your vendors update their negative payment report with a positive report once your payment is received. The sooner this takes place, the faster your credit score will recover.

Pay Attention to Credit Utilization

One of the main factors in determining your business's FICO score is how much money you owe to lenders. With that said, it's important to make sure your outstanding balance never outweighs your available credit.

This is referred to as credit utilization and it works on a 30% scale.

For example, if your business has a $10,000 line of credit, your balances should never exceed $3,000 dollars. Leading a zero balance business lifestyle is the best route to take, but if you do have outstanding balances, just make sure they don't exceed 30% of your credit limit.

If you're trying to improve your business credit score, then take advantage of some of the pointers mentioned above.

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