6 Ways to Increase Your Business Credit Score

In the first few years after opening a small business, many entrepreneurs find they need additional resources to stay afloat. A small loan or buying additional equipment on credit may help businesses weather the lean startup period. But without a good business credit score, entrepreneurs may have trouble getting that kind of help, or finding favorable interest rates.

Following are six tips for building and maintaining a healthy business credit score.

  1. Separate personal and business finances.
    Owners should ensure their own bank accounts and finances are separate from the business’s. If one or more business owners should develop a poor credit rating or need to file for personal bankruptcy, that could harm the business, if finances aren’t separate.
  2. Get a company credit card.
    Many financial experts advise young people to use credit cards in order to build a favorable credit rating, and the same advice holds true for businesses. Get a credit card early, use it for small purchases, and pay the balance in full every month.
  3. Make payments on time or early.
    In recent years, creditors have cracked down on borrowers who make late payments. Being a few days late on a payment might not be an event that shows up on a credit report, but it could cause creditors to raise interest rates on existing accounts, which in turn could increase interest rates for future loans or credit accounts.
  4. Ask vendors to report favorable payment history.
    A good credit rating with Dun & Bradstreet is the business equivalent of having a degree from an Ivy League college. In both cases, earning that favorable reputation takes work.A business must provide at least three professional trade references to establish a credit rating with Dun & Bradstreet. Those references could come from vendors, credit card or utility companies, or investors – pretty much any established business that can vouch for the fact that a budding business has made timely payments.
  5. Don’t close dormant accounts.
    Some company credit cards may be seldom used, but it’s wise to keep those accounts open. Available but unused credit shows potential lenders that a business is capable of handling additional debt.
  6. Monitor credit reports.
    Credit bureaus do occasionally make mistakes, so business owners should check their credit reports periodically to make sure they contain no errors. A fee may be required to access one’s credit report, but it’s worth the expense if it can prevent errors from negatively affecting a business credit score.

The Big Picture

Credit agencies determine a business’s credit score based on several factors, and one of those is simply how long a business has existed and how successful it has been. So in some ways, new businesses are at a disadvantage – they must work hard to prove their creditworthiness.

Entrepreneurs may be able to build their credit score faster when they avoid taking on early debt. Some debt may be necessary in those fledgling years, but the best strategy is for would-be business owners to save enough money that they don’t need a big loan to get started.

Lusk Law, LLC specializes in assisting new businesses, helping to avoid litigation when possible, and we are ready to actively represent our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to small and start-up businesses in Howard County, Baltimore County, Baltimore City, Frederick County, Carroll County, Washington County, and Anne Arundel County, and other counties in Maryland.

With over a decade of experience in representing small businesses, we’re ready to offer a consultation concerning your rights. Please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.

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