It’s a simple equation: your business credit score determines whether and how much money you can borrow, your interest rates, and other important factors in successfully running a small to medium-sized business. If your score is low, however, how do you improve it? Not so simple.
Although calculated differently, your business credit score is much like your personal credit score. How much have you borrowed vs. your credit limit, whether you pay your bills on time – these all factor into your score. Here are some steps you can take to improve your business credit score and capitalize on the benefits of better credit.
Improving Your Business Credit Score
If you’d like a better business credit score, here are some tips that will help you improve:
1. Obtain Your Credit Report
You can’t improve your credit if you don’t know what’s affecting your score. You can get your credit report from one of the major reporting agencies such as Dun & Bradstreet, Experian, and Equifax. Carefully review your report, and you’ll have a clear idea of why your score is what it is and what you can do to raise it.
2. Report Any Errors
This is why carefully reviewing your business’s credit report is key to improving your score. Your report may have errors on it you don’t know about. Find any negative reports against your credit history and compare them against your records. You can contest anything erroneous, and having those removed can help your overall credit score.
3. Pay Off Collections
Once you’ve eliminated errors you can identify and address the negative aspects of your business’s credit history. Collections have a serious impact on your score. Focus on paying those overdue bills that have gone to collections. Once you pay them off, ask the agency to delete the negative account. Not all collection agencies do this, but it’s worth it to ask. Removing any dings to your credit history will help your score.
4. Reduce Your Credit Utilization Ratio
Credit utilization is the ratio of the credit you’ve used to total available credit. Essentially, you want more credit than what you’re using. The most favorable ratio is at or around 15%. Focus on paying down your credit and improving that ratio. Other ways you can improve your utilization ratio include opening new lines of credit when possible; making a habit of paying via other means than credit; and paying off credit cards.
5. Increasing Credit with Vendors
Contact your vendors and ask if you can open credit lines. As it will add to your overall amount of open credit, increasing your credit limit will improve your credit utilization ratio. Then pay your bills on time. Not all vendors will report to credit reporting agencies, but those that do will help improve your business credit score. And you don’t want anything going to collections.
6. Leave Accounts Open
Once you’ve paid off a credit card it can be tempting to close out the account so you can’t accumulate debt again. It may seem counterintuitive but resist that urge. Leaving business credit accounts open increases your open credit, which positively affects your credit utilization ratio. It’s far better to just leave the account open and forget about it. Remove the card from your wallet or other means of easy access, put it in a safe place, and forget about it.
Another Tip: Hire a CPA for Your Small Business
Make things easier on yourself. Maintaining a healthy credit score demands a lot of scrupulous record keeping, and as a business owner your time is limited. Keeping on top of your credit pulls you away from other important tasks. A certified public accountant can help: CPAs know what records to keep and can keep careful track of your credit history.
Further, a small business CPA can go to bat for you when you have negative reports on your credit history, can make the necessary calls, and can keep your credit score as high as possible.
Staying on top of what cards to use and what accounts to accumulate debt on or pay down can be daunting. A certified public accountant can also advise you on how to best spend your money in light of your credit score.
When you hire a certified public accountant for your small business, you free up time and can focus on building your business while enjoying the benefits of a better credit score.
Let a CPA from Leadingham Rodgers Help You Improve Your Business Credit Score!
Leadington Rodgers’ team of certified public accountants can help you stay on top of your credit history and obtain and maintain a high business credit score. Free up your time to focus on growing your business and let our expert CPAs do the rest; rest assured that we’re applying due diligence and doing everything within our power to keep your credit report clean and your score as high as possible. Call (334) 270-3366 and trust your good credit to us!