Almost 50% of small business borrowers are not able to take a loan because of bad business credit scores. These often play a big role in getting the most affordable payment plans. Credit checks are not only done by banks and mortgage companies, this tool is also used by other businesses for determining eligibility of their potential business partners. This means that bad credit can endanger your business growth and responsible entrepreneurs need to think about ways for improving credit score of their companies. In this article we are going to list several tips that will help you to keep your credit scores high.
Keep your Credit Information Current
There are three major credit bureaus that collect credit data from businesses and individuals and release it on demand. Although we are talking about big and responsible businesses, even they sometimes make mistakes. This was brought to public eye recently, by comedian John Oliver in Last Week Tonight show, and it emphasizes how important it is for small business enterprises to be in close contact with credit bureaus. They should monitor their score and point out all possible mistakes, and in some bureaus business owners can even update their scores, add basic information to their accounts and upload financial statements.
Ask Lenders whether they Report your Payments to Credit Bureaus
Most banks report all of their dealings to some of the three major credit bureaus, but businesses with bad credit are not eligible to take loans from banks. In this situation most entrepreneurs decide to take loans from small business lenders that often don’t report their activity. Your company boosts its credit when you are making your loan payments in time, but this doesn’t affect businesses that take loans from creditors who don’t report these dealings. That’s why you need to check whether creditors are reporting your payments, before choosing the right company to take your loan from.
Ask Suppliers to Report on-time Payments to Credit Bureaus
You can use your suppliers to boost company’s credit. Most companies have special relations with their suppliers. Entrepreneurs are often allowed to make payments several days, or even weeks after they receive desired materials. This can also be classified as a type of credit, but suppliers need to report it to the credit bureau, especially if these payments are part of the signed credit agreement. On-time payments will boost company’s credit. Even if suppliers don’t report company’s credit, some credit bureaus allow entrepreneurs to list these dealing as trade references and add them to company’s account.
Make on-time or early Payments to Creditors
Good credit score is very important. It is required for getting the best loans as well as the best rates on surety bonds and insurance policies. Two things service oriented small businesses can’t work without. Basic principle of boosting your credit involves making payments on time or even earlier in some cases. Credit bureaus are often very strict and some of them require you to make payments before due dates.
Never Max Out on your Credit Cards
Many small business entrepreneurs use credit cards as a tool for lending money. Truth is you should never max out on your credit card. First of all credit card plans come with much higher interest than regular business loan plans and maxing out and not making credit card repayments in time can destroy your credit rating. Optimal credit card use would be up to 20% or 30% of the available sum.
All small businesses have a tendency to grow and they can do that without signing lucrative deals. The fact that today’s entrepreneurs won’t sign a contract or even shake a hand with an entrepreneur who has a bad credit score is enough to tell you how important it is for small businesses to get rid of bad credit. When they finally succeed in boosting their credit and bringing it back to normal limits, entrepreneurs should change their attitude towards credit and start paying their loan obligations in time.