A business credit score is a reflection of your company’s financial health and its reliability as a borrower. Businesses with strong credit scores often find it easier to secure financing and are more likely to have access to lower rates and attractive borrowing terms.
If you’ve found that you’re in need of a business credit score enhancement, you’re not alone. Stick with us as we review some of the factors that could be pulling your score down and provide some simple strategies for elevated business scores.
Factors That Can Decrease Your Business Credit Score
A business credit score makes it easy for lenders to quickly understand how much risk they’re taking by giving you a loan. When evaluating a company’s creditworthiness, lenders often lean heavily on this score because it is a reflection of your company’s history of on-time payments, debt load, credit utilization, and more.
Some of the most significant issues that can lower your score include:
- Limited credit history due to being in business for a short time
- Inconsistent payment habits
- Multiple credit accounts opened in quick succession
- Routinely maxing out business credit cards or nearing the limit of lines of credit
- Unpaid debts sent to collection agencies
- Bankruptcies, liens, or judgments against the business
While some of these pitfalls may be unavoidable, it’s critical to understand their impact. Whenever possible, make it a point to take preventative measures and maintain a healthy credit profile.
Tips for Enhancing Your Business Credit Score
If you’re not happy with your current score, don’t worry. There are some simple steps you can take today to get your company back on track. The following strategies can provide a significant creditworthiness boost for businesses. Keep in mind that it may take some time to see changes in your score, but each step you take increases your company’s long-term financial outlook.
1. Consistently Monitor Your Score
Regularly checking in with bureaus like Experian, Equifax, and Dun & Bradstreet can help you stay up to date on the status of your business credit score. When you keep a close eye on your score, you’ll quickly notice any issues that come up. If an unauthorized account is opened in your business name, an error is posted to your report, or an action you’ve taken starts to pull your score down, you can take action to rectify the problem right away.
2. Prioritize On-Time Bill Payments
Late payments can have a significant negative impact on your credit score. Avoid unintentional problems by setting up automatic payments to ensure you’re paying all your bills consistently. If you’re not comfortable doing this, be sure to set aside time every week or two to check your accounts and pay bills, or hire a professional to do it for you.
3. Manage Your Credit Utilization
High credit usage can be a red flag for lenders. Try to keep your balance below 30% of your limit. If necessary, periodically make larger payments to keep this number in check. Also, avoid closing old accounts as this will immediately increase the utilization percentage based on your remaining credit.
4. Seek Higher Credit Limits
Higher credit limits provide financial flexibility without straining your credit utilization rates. Regularly review your credit limits and periodically negotiate them with your credit providers. Having higher limits demonstrates that your current lenders trust your business, which can boost your company’s financial reputation in the eyes of future creditors.
5. Be Patient
Elevating your company’s creditworthiness isn’t something that happens overnight. Over time, responsible financial behavior will naturally boost your business credit score. Consistency is key, so keep monitoring your finances, paying your bills on time, and making informed decisions.
6. Have a Backup Plan
If you need a cash infusion and your business credit score isn’t yet up to par, keep in mind that there are other options. Traditional lenders might be hesitant to offer loans to a business with a less-than-ideal score, but that’s where alternative lenders like Zinch come in.
Zinch offers merchant cash advances and short-term business loans, primarily focusing on your business’s duration and monthly revenue. With a creditworthiness evaluation model that doesn’t heavily rely on credit scores, we provide businesses with the breathing room they need while working to improve their credit.
Secure Your Company’s Financial Future Today
Getting the financing your business needs may be easier than you think. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
