Repair Your Business Credit Score Fast With These 5 Tips
If you're watching this, then you know that
your business has a credit score that's separate from your personal credit history and personal
credit score. Business credit is a very different animal
from personal credit, and it takes a unique set of steps to repair a damaged business
credit score. I'm Priyanka Prakash, a small business expert
at Fundera. I specialize in writing about credit and lending. Today, I'm going to share five proven tips
that will help you repair your business credit score. A higher business credit score will help you
land more financing options, pay less for financing, and get better terms from suppliers. All in all, a good business credit score will
give your business a leg up over the competition. Let's start with a look at what makes up your
business credit score. There are three main business credit bureaus
that track business credit scores: Dun and Bradstreet, Experian, and Equifax. Although each uses slightly different credit
scoring models, you can expect four factors to really impact your business credit score.
These are: 1. Your business’s payment habits. This includes the number and types of trade
lines, the size of your outstanding balances, payment history and credit utilization. Trade lines might include business credit
cards, business loans, and accounts with suppliers of goods and services. 2. Derogatory items. The presence, amount, and recency of negative
items on your business credit report such as tax liens, court judgments, and bankruptcies
affects your score. 3. The number of business credit inquiries. These are triggered when your business applies
for credit and can also affect your score. And finally, number 4. Inherent business factors, such as the number
of years you've been in business, the company size, and industry. You can find a copy of your business credit
report and your score directly from one or more of the business credit bureaus. Now that you know what factors can cause a
shift in your business credit score, we’ll cover the most impactful five ways to repair
a poor business credit score. Tip number one. Correct errors on your business credit report. According to a survey by the Wall Street Journal,
nearly 25% of business owners who check their business credit reports found errors.
These errors could be responsible for your
low business credit score. Even something as simple as the wrong industry
code for your business could throw off your credit. For example, let's say you make software for
trucking companies, but the business credit bureau accidentally categorizes you as a trucking
firm. That places you into a riskier category, and
you could end up paying hundreds or even thousands of dollars more for financing. To correct errors on your business credit
report, follow the agency’s process for error reporting. In most cases, you'll need to highlight the
incorrect information on your report, provide proof to show why there's an error, and either
mail, email, or fax this documentation to the agency. Most investigations are completed within 30
days, though sometimes agencies like Experian have a portal where a business representative
can make certain updates immediately.
Tip number two. Choose suppliers and lenders that report payments. Small businesses that have been behind on
payments in the past can repair their business credit by showing timely payment behavior,
but your positive payment history can only be rewarded if you work with suppliers and
lenders that report payments to the business credit bureaus. For example, if you are a retailer of household
goods who buys inventory from a wholesaler, ensure that the wholesaler reports to at least
one (and preferably more) business credit bureaus. That way, every time you pay an invoice from
your wholesaler on time or early, you'll be building up your credit score a little bit
at a time. Uline, Staples, and FedEx are a few examples
of vendors that report to the business credit bureaus. You can also apply for a corporate fuel card
to add on an additional tradeline to your business credit report.
Tip number three is to apply for a business
credit card. One reason for a poor business credit score
may be that you simply don't have enough tradelines on your account. One of the easiest trade lines to apply for
is a business credit card. Even making small purchases on a business
credit card and paying them off on time each month can help you make big gains in your
business credit score. If you're unable to qualify for a regular
business credit card, try a secured credit card. With a secured credit card, you put down a
monetary deposit to qualify for a credit line. Alternatively, you can apply for a corporate
credit card from a big box retailer like Home Depot or Lowes. Tip number four. Be cautious when applying for new credit. If you're on the market for a business loan
or business credit card, you could end up in a catch 22. You need financing, but every time you apply
for credit, you get hit with an inquiry that further damages your business credit score. The key here is to only apply for a few lenders
or credit cards which will be the best fit for your business.
Do your research in advance to understand
what you might qualify for. Spread out your applications, and only apply
for credit when you need it. Never borrow more than you need. With a single application which won't hurt
your credit score, the team at Fundera can help you figure out how much financing you
can afford and the best lenders for your company. Tip number five. Keep your public records clean. The final tip to repair your business credit
score is to keep negative public record items off your business credit report.
Items like unpaid business taxes, business
bankruptcies, and court judgments remain on your business credit report for years, and
they can be very damaging to your business credit score. We suggest keeping a calendar of tax deadlines
so you never miss one, and the moment you start experiencing cash flow issues, try to
cut back on business expenses or increase your business revenue so you don't fall into
a deeper hole and start missing payments.
If you experience legal trouble, contact a
business lawyer right away. Sometimes, these types of issues are out of
your business's control, but you can take steps to minimize the damage to your business
credit history. Those are our five tips for repairing your
business credit score. With these tips in mind, you can more confidently
secure the best, most affordable financial products for your business. For more on credit loans and other small business
topics, check out fundera.com/blog, and subscribe to our YouTube channel for more videos. Thanks for watching..
