If you’re a small business owner, your business credit score is more than just a number – it’s a measure of how much you’re capable of under the right circumstances; it represents potential. But what should you do if your business credit is less than stellar? In that case, you need to get to work improving it. You don’t want to be held back by your business credit if you’re presented with an exciting opportunity, and just like your personal credit, it may only take a few tweaks to improve your standing with lenders and credit companies.
Get Your Report
The first step to improving your business credit is to request a copy of your credit report – but don’t get this confused with your personal credit report. Business credit reports are sourced from a different set of agencies and are also scored differently than personal reports, and are even scored differently across different providers. Experian, for example, provides an Intelliscore from 1 to 100, while Equifax and Dun & Bradstreet both use three different reporting scores, each with different scales. These measure factors like financial stress, risk, and payment ability.
Unlike your personal credit score, you aren’t entitled to a free, annual report, so you will likely have to pay for a credit report, but this is a worthwhile expense, so contact one of the three providers to request a report. It’s especially important to check your business credit report if you’ve been denied credit or if you’ve received an alert that there’s been a change to your credit report; such alerts are available from free services like Dun & Bradstreet’s CreditSignal.
Correct Those Errors
In addition to checking your credit report, be sure to sign up for a business credit monitoring service. These services keep an eye on your credit score and alert you to any changes, and they can also inform you if someone else requests a copy of your score. Business credit reports are public information, so other people can view your startup’s financial health, but at least these alerts can let you know if you’re under outside surveillance. Before anyone else gets their hands on your report, though, make sure you review it for errors.
Reporting mistakes are a common cause of poor business credit; maybe your report still shows a debt you paid off or includes accounts you never even opened. Review your report for mistakes and report them to the credit companies. Reporting companies are required to investigate these claims, and that report may lead to an improvement in your credit score.
Check Your Habits
The next step to improving your business credit is to assess your spending and payment habits. Do you shop around to make sure you’re getting the best price on equipment and other supplies? Do you buy refurbished goods when possible? Do you pay your bills on time? Making sure you’re minimizing your expenses while also paying your bills will make a big difference in your credit score.
If you’re struggling to build better credit habits, take simple first steps like automating your payments so that creditors receive at least the minimum payment on time each month. This can be anxiety-producing if you’re having cashflow problems, but it’s an important first step towards better credit.
Know Your Lenders
Finally, if you want to keep your business credit in check, make sure you’re familiar with all your lenders, because your credit score doesn’t only reflect your credit card use – it takes all of your borrowing into account. While credit card companies and bank loans are likely known quantities and reliable sources of credit, others, such as payday lenders and even installment loans, tend to target individuals with poor credit, and borrowing from them can make your credit even worse.
Do your research before borrowing from any lender, and as you work to pay off existing debt, try to pay off these questionable lenders first. They charge the greatest amount of interest and can force you to pay significantly more than the original loan.
One of the best things about business credit is that it’s separated from your personal credit, and for many startup founders, this makes business credit a kind of second chance – an opportunity to start something new. In order to take advantage of that opportunity, though, you need to be proactive about protecting your business credit score. Get your report and start making improvements today.