Tips to Raise Your Business Credit Score
You’re familiar with the importance of a personal credit score—it’s critical to buying a house, a new car, financing personal loans, and more. Business credit scores are a bit different but equally important. But what can you do if your small business credit score isn’t as high as you’d like? While it can take up to two years to establish or improve your credit score, it’s not impossible. Let’s discuss.
Various factors have an impact on your credit score, including the length of time you’ve been in business (longer equals a higher score!), assets that your business owns (such as property), yearly revenues, and loan/credit history. Something called industry risk is also considered. Historically speaking, the restaurant industry is viewed as more risky than other industries; this can affect your business credit score, too.
To improve your score, there are a few key things you can do. First off, pay your bills on time—or sooner, if your cashflow allows for that! There’s also a somewhat backward-sounding benefit to taking on debt (even debt that you don’t need) and paying it back in a timely manner. Just as with your personal credit, rating agencies prefer that you have a good track record of responsibly taking on additional debt and repaying it.
A lot of credit rating agencies will also check how many business credit cards you have and how fast you’re able to pay those bills. You definitely don’t want to max out your business credit card limits, either. It’s actually more beneficial to take out additional credit cards rather than maxing out your existing ones. You should also be mindful to keep your personal and business finances completely separate. In doing so, you’ll protect your credit scores should your business run into financial issues (or vice versa). Having a business checking account is a key step to maintaining separation between yourself and your business.
You’ll want to check your business credit score on a regular basis. Check for inaccuracies, changes to your personal information, inaccurate accounts or payment history, or anything else that looks questionable. You should then dispute these errors.
As with a personal credit score, it’s important to establish good credit for your small business. This gives you an even greater chance of securing the funds you might need to expand your business, invest in new opportunities, etc. But if your credit score is less than perfect, no need to fear. At ARF Financial, our applicants simply have to have a minimum Equifax credit score of 551. Learn more about our quick, hassle-free loan application today—ARF Financial is ready to help fund your small business success!