Business credit scores are vital to a business’s health and success. If you own a business and have any sort of open credit, then you certainly have a corresponding credit score. If you are looking to get any type of business financing—from a loan to a credit score, you should be exploring how to improve your business credit score.
What’s a Business Credit Score?
A business credit score is similar to a personal credit score. Credit reporting agencies use various methods to calculate creditworthiness—including your number of trade experiences, outstanding balances, payment history, and more—and that number ranges from zero to 100. The close to 100 you are, the better your credit score.
Why Would You Want to Improve Your Business Credit Score?
The main motivation for wanting to improve your business credit score is that it heavily influences the financing your business can secure. A higher credit score means you can borrow more money. A low credit score could prevent you from borrowing any money at all.
The good news is that if you find yourself with a less-than-stellar business credit report, you don’t have to fear: there are many ways you can quickly improve your business credit score. Some ways are more obvious than others, and that’s why we’ve created this comprehensive guide to help you improve your business credit score.
7 Ways to Improve Your Business Credit Score
1. Check your credit report.
You can obtain your business’s credit report from the major credit reporting companies such as Dun & Bradstreet, Equifax, and Experian. These reports aren’t free—even if you’re the owner—but they’re always the first necessary step in getting squared away on your credit score.
Once you know your score, you know what you’re working with and can get the information you need to raise your score, including which accounts are negatively affecting your report and any disputable items on the report.
2. Pay your bills on time.
This is a no-brainer and one of the easiest ways to improve your business credit score, but if you do not pay your bills on time, your credit score will suffer, and anything else you do to improve your score will just be canceled out by the fact that you’re still a debt risk.
3. Decrease your credit utilization ratio.
One of the things credit reporting agencies look at when determining credit scores is the ratio of credit used in relation to the amount of credit available. It’s typically a good idea to keep that ratio under 15%.
These are a few ways to make that happen:
- Pay off your balances: This is obvious, but will ensure you decrease the ratio. If you can’t pay them off entirely, at least get them down as low as you can.
- Increase your credit limit: Ask your credit card provider to increase your limit, and voila, you’ve just decreased the ratio.
- Decrease credit card spending: Keep up the good work by decreasing the amount of money you spend on credit.
- Open a new line of credit: This may seem counterintuitive. Why would you want more credit available if you’re not going to use it? It’s all in the ratio. Having more credit available and not using it all makes you look good to credit reporting agencies.
- Pay your bills more than once a month: This will keep that ratio down as the spending won’t pile up over the course of the whole month.
4. Establish credit accounts with suppliers.
If you work with certain suppliers over and over again with a good payment relationship, establish a credit account with them to increase the number of positive payments to your file. This can help improve your business credit score.
5. Add positive payment experiences to your credit file.
Not all vendors and suppliers share payment data with business credit-reporting agencies, but you can add trade references to your company’s credit file manually through the credit reporting agency. The more positive payment experiences you can add to your file, the better.
6. Dispute any errors and inquiries.
It’s possible to work with credit card companies and credit reporting agencies to get negative feedback removed from your credit file. It’s important to make sure that what’s being reported on your company is accurate and up-to-date. Hard inquiries and unpaid accounts negatively affect your report, so if you see something on your report that shouldn’t be there, call to dispute it. This is a critical way to improve your business credit score.
7. “Pay for delete” with collections.
If any of your debts went to collections, pay attention when it comes time to make good on your them. Make sure that the agency will delete the negative account from your credit report. You have to explicitly ask for this—otherwise, paying off this debt won’t help your credit score because it will still show a history of negative accounts.
You need to have the negative account history removed entirely for it to affect your score. If they won’t “pay for delete,” there’s really no need to pay the collection agency if your goal is to improve your score—it will affect the score regardless of whether or not it’s paid.
Your business credit score is a critical factor in securing a business loan, among other things. But don’t fret, even if you have less-than-stellar credit, there are ways to improve your business credit score and graduate into better loan products over time.
Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera.
Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.