According to recent surveys, more than half of all business owners are denied funding due to poor credit. While there are many financial resources to explore, building strong business credit should still be a priority, especially if you plan to expand operations in the future. As a matter of fact, there are several small steps you can take to improve your score without ruining your schedule or your budget.
Build a Complete Credit Profile
Credit bureaus are responsible for gathering data and calculating your score, but technology has made it easier to monitor this information by allowing you to create a complete profile online. Like personal credit scores, reporting methods tend to vary, but updating your account with financial statements guarantees that your credit report will be current at all times. You can even dispute unknown inquiries or charges that do not belong on your report.
Take Advantage of Trade Agreements
Another way to boost your credit score is to establish an accounts payable agreement with your suppliers. Once you have set up three regular trade lines, your past payment history can be determined. No matter what terms you agree to, a third-party vendor is essentially a lender and you are responsible for paying off the materials you have requested for your business.
Submit Your Payments Early
For most business owners, keeping track of due dates is a necessity, but staying ahead of your bills is a habit that can earn you a perfect score. On the other hand, you have to use your credit in order to build it up, so don’t go overboard on payments without making a few strategic purchases. A good rule of thumb is to spend approximately 20 percent of your limit and pay the balance off early to bump your credit score.
Work With a Reporting Lender
Although the negative effects of business credit reporting are well known, many people overlook the positive impact lenders can have on your score as well. If you are looking for financing or applying for a loan, select a lender who reports to a credit bureau so you can reap the benefits of each payment. All you have to do is ask about reporting methods before filling out an application.
Overall, building your business credit takes patience and organization. Don’t get discouraged by financial jargon and low scores. With these four easy steps, you can steadily improve your credit and solidify the foundation of your business.