For business people and aspiring entrepreneurs, an excellent business credit score is a must-have. It doesn’t only give access to different financing options, it also helps businesses get new clients and potential investors.
Find out why it is a good idea to purchase business assets on finance.
If you plan to apply for business loans but have had bad business credit, then you better work on it right away because it takes time to build a credit-worthy profile. These are some useful tips to improve business credit profile
6 Ways To Improve Your Credit Profile
1. Check that your profile is accurate.
The first thing that you should do is to make sure that your business credit profile is reported without a single error to the business credit bureaus like Equifax, Experian and Dunn & Bradstreet, the three biggest business credit bureaus in Australia. With an accurate profile, banks and lenders will be able to correctly analyze your business credit accounts, including credit cards, bank accounts, utilities, and other credit lines. Any error on your business’ past transactions will contribute to the denial of your loan applications.
Other data in a business credit profile include public information like tax records, lawsuits, and business registrations. If you find any mistake on your business credit record, send a dispute letter to the credit bureaus right away so they can rectify the error.
2. Separate personal and business credit.
This is a common mistake that owners commit during the early stages of their businesses. They use personal credit, like credit cards and personal loans, to finance the business requirements. This is quite understandable because start-ups usually don’t have enough credit rating just yet. However, this practice will damage your personal credit score and prevent your business from building a good credit profile.
The best thing to do is to apply a secured credit card for your business to slowly build its credit rating. Afterwards, you can get unsecured credit cards and small business loan using your business’ credit profile.
3. Trade lines with your partners.
Another way to improve your business credit profile is to establish trade accounts with your suppliers and have them report your payment to a credit bureau. Ask the suppliers to make the inventories payable in a week or two, an account payable type of transaction. Then make the payment per agreed deadline. Having a couple of trade lines will greatly boost your business credit rating.
You can also enlist your suppliers as trade references on your credit account so that the credit bureaus can collect trade data from them. This will still be counted to your credit rating.
4. Pay your creditors on time or early.
Whether you are building personal or business credit, a good history of payments is always required. Make sure to pay your credit card bills and small loans on time, or earlier if possible. Credit bureaus take notice of our early payments most especially and will surely translate them to an increase in your credit rating. It would also help your business credit profile if you utilize your lines of credit well. Limit your utilization from 20% to 30% each month.
5. Borrow from trusted lenders that report to credit bureaus.
Some lenders don’t report credit transaction to the three credit bureaus and this will not help your business credit profile at all. Hence, make sure to pick those that do make credit reports before applying for small business loans, so nothing will be wasted. It will be good if you can get a loan from banks because they do report to credit bureaus, as well as some online and private lenders.
6. Keep your public records clean.
To improve your business credit profile, you must not only keep your profile accurate but also clean and free of negative marks. Avoid getting involved in debt collection lawsuits because a ruling against you will further tarnish your business credit. Judgments, liens, and bankruptcies stay on credit record for at least seven years and the effect will be very hard to negate. So, make sure to stay out of them.
By following these tips to improve your business credit profile, you will be able to get lower interest rates and best deals on your next business loan applications.
If you require business finance, we can help. At Finance Ezi, we have access to a large panel of lenders and can find you the lowest interest rate loans to suit your financial situation.
Call us today on 1300 003 003 or apply online to get started.