Your business credit score is important when trying to secure a loan, lowering your interest rates, and determining what products you qualify for.
It can be tempting to focus all your financial energies on improving your personal credit score. It’s an understandable mission, considering how often lenders, insurance companies, utility companies, and landlords ask to see your personal score.
If you run a business looking for low-cost capital, however, your business credit score can be as important in determining what products and rates you qualify for. Some vendors might even check your business credit score before they agree to work with you.
As you begin your search for business funding or a new vendor partner, taking steps to boost your business credit score makes the search easier and more fruitful. Here’s your guide to increasing your business credit score quickly.
Why does business credit score matter?
Just as your personal credit score sums up your history as an individual borrower, your business credit score sums up your business’ borrowing history. Depending on which business credit bureau you access it from, your business credit report will contain information relevant to your business’s borrowing and payment history, like:
- Banking history
- Trade history
- Collections history
- UCC filings
The 3 main business credit bureaus — Dun & Bradstreet, Experian, and FICO — all collect the above data and create your business credit score according to their own system.
The resulting score is important for many reasons. Primarily, if you’re applying for elite business financing — like a commercial real estate loan, bank loan, or SBA loan — lenders will check your business credit score during the application process. Your score will help them to decide whether you qualify for a specific type of funding — and if you do, what rates you qualify for.
Far more business lenders and credit card issuers will consult your personal credit score during their application processes. But your business credit score will come into play if you apply for the most affordable, long-term forms of funding. So getting your business credit score into shape is more than worth the effort.
Boosting your business credit score quickly
Boosting your business credit score is a straightforward task. Odds are, you’re doing most things right already: Registering a business name, getting an EIN, and having a business phone number are all steps towards establishing your business credit score.
Beyond those fundamentals, though, pulling the following levers can help you improve your credit score even more.
1. Open a business bank account
Opening a business bank account will help you create a home for your business finances and further separate them from your personal finances. As a result, business credit bureaus will be able to better track your business banking activity and see every cent you invest in and earn with your business.
Plus, if your end goal is to apply for business funding, then you’ll likely need a business bank account for those applications. Because you’ll have to do it eventually anyway, open up a business bank account ahead of the application process. That way you can reap the additional rewards of an improved business credit score.
2. Get a business credit card
Whether or not you qualify for most business credit cards will usually hinge on your personal credit score. However, many of the best business credit cards available today will report your activity to business and personal credit bureaus. So, if you open up a business credit card account with an issuer that reports to business credit bureaus, the additional credit limit will factor into your business’s total credit utilization.
Your credit report is not infallible — both your business and personal credit reports will occasionally have incorrect information, such as hard inquiries or negative accounts, listed.
Your credit utilization ratio — the amount of credit you’ve used relative to the total available to you — is important, because it shows that you don’t max out every line of credit that comes your way. Keep your ratio low (by repaying debt quickly, and/or by adding additional credit lines like this) and your score will improve.
3. Make your payments on time
Having that business credit card will be yet another opportunity to spend responsibly — meaning making on-time payments and maintaining low credit utilization. Apply this responsible spending to each and every payment you need to make on behalf of your business, whether they’re loan payments, credit card payments, or phone bills.
Of course, this strategy won’t be the quickest of fixes. Nonetheless, you’d be surprised by the momentum that all-over payment best practices can have in improving your business credit score.
4. Dispute existing errors on your report
Your credit report is not infallible — both your business and personal credit reports will occasionally have incorrect information, such as hard inquiries or negative accounts, listed. Review your business credit report and ensure there isn’t anything on there that will ding your score. If you do have errors on your report, a better score is sometimes a phone call to the credit bureau away.
5. Work with vendors who report to credit bureaus
Finally, as you decide which vendors to work with, be sure to choose partners that report your payments to business credit bureaus. Internet providers, utility companies, even phone networks could all be sending in positive financial reports to credit bureaus as frequently as you pay your bills to them. Don’t miss out on this opportunity for your responsible business practices to go noted.
The bottom line on building business credit
There you have it — 5 easy levers to pull to quickly increase your business credit. Sleeping on your business credit score is an easy mistake, so realizing that your business score matters is the most crucial step of all. By virtue of making it through this article, you’re already on your way to a better business credit score.