Tips for improving your credit score
At some point in the life of your business, you’ll likely need to borrow capital.
That’s why it’s important to build and maintain a solid credit score now – so when the time comes to apply for financing you’ll be able to prove to a lender you’re a good risk.
Here’s some simple steps you can take today to raise your credit score.
Know your numbers
A quick online search can help you find out where you stand with your creditors. Simply contact a credit reporting agency (e.g. Equifax, TransUnion, or Experian) to request your free credit report. Your credit rating will appear as a number scored between 300 and 900; the higher the number, the better your rating. The calculation is based on a number of factors, but the one that carries the most weight is your payment history. When calculating your rating the credit agencies take into account whether you:
● pay your bills on time
● make at least the minimum monthly payment on your credit card balances
● have defaulted on any loans, or
● have accounts in collections.
It’s recommended that you review your credit report twice a year to ensure there are no errors or omissions that may negatively impact your score.
Use credit with care
Although it can be difficult for a small business to qualify for a business loan or line of credit – especially if you’ve yet to prove your company’s profitability – you may still be able to qualify for a company credit card.
A business credit card offers you an opportunity to build good credit at a low risk. Most likely you’ll be offered a card with a small spending limit at first. Use it wisely, and commit to paying off your balance in full each month.
As you know – based on how your credit rating is calculated – there’s no better way to establish good credit than to pay your bills in full and on time.
Smart credit score strategies
● Use this free debt repayment calculator and make a plan for paying off your debts as quickly as possible.
● When it comes to revolving credit, use no more than 30 percent of your available credit. The lower the percentage, the better for your credit file.
● Talk to a lender about consolidating multiple credit card balances with a personal loan, mortgage line of credit, or balance transfer credit card.
● Make multiple credit card payments throughout the month to avoid late payments, pay down your debt faster, and lower your interest fees; this is a great way to increase your credit score by improving your credit utilization ratio.
● Keep old, unused creditor accounts open, as a good long-term history with a creditor is to your advantage.
● Try to negotiate with your credit card company. You might be surprised by their willingness to reduce your interest rate, lower your monthly minimum payment, or waive late fees.
When it comes to improving your credit score, slow and steady wins the race. To help you stay motivated, keep your long-term goals in mind. This will help you make the effort needed to save money, keep to a consistent payment schedule, and use your credit wisely. And when it’s time to invest in scaling your business, opening another retail location, or purchasing new equipment, you’ll be set to apply for financing with confidence.