Your business credit score is like the report card for your company's financial health. Unlike your personal credit score, anyone with a few dollars to spend and internet access can get their hands on it. (Competitors, clients, vendors, etc.) That number can be used for good (excellent terms, better approval odds, larger loan amounts) and evil (sky-high interest rates, rejections, and so on).
Want to crank up that score and unlock more opportunities? Do This, Not That.
👍🏼 Do This: Pay Your Bills on Time, Duh!
It's the kindergarten level of credit management, but you'd be surprised how many businesses trip up here. Timely payments not only keep your credit score happy but also avoid unnecessary stress and late payment fees. Be the kid who finishes their homework before bedtime.
👎🏼Not That: Neglecting Your Personal Credit Score
Your personal and business credit are like peanut butter and jelly – inseparable. Neglecting one can impact the other. Keep both in check to maintain harmony in your financial sandwich.
👍🏼Do This: Keep Your Credit Utilization Low
Picture your credit limit as a pizza – you're better off not devouring the entire thing. Maintain a low credit utilization ratio, ideally below 30%. It tells the credit gods that you're responsible and not maxing out your resources.
👎🏼Not That: Maxing Out Credit Cards
Using your credit cards like a kid in a candy store might be fun, but it's a surefire way to tank your credit score. Keep your credit utilization low, and resist the urge to splurge.
👍🏼 Do This: Establish and Nurture Trade Lines
Like making friends on the playground, building strong trade relationships is crucial. Establish credit with vendors and suppliers, and make sure those relationships flourish. These trade lines can add positive notches to your credit history.
👎🏼 Not That: Applying for Too Much Credit at Once
It's not a buffet; you don't need to sample everything. Applying for multiple credit lines in a short span can raise eyebrows and lower your credit score. Be strategic, not greedy.
👍🏼 Do This: Monitor Your Credit Regularly
We're not suggesting you become a credit score stalker, but keeping tabs on your score is smart. Regular checks help you catch any errors or surprises before they become credit score nightmares.
👎🏼 Not That: Ignoring Your Credit Score
If you're treating your credit score like that dusty treadmill in your garage, it's time to change your behavior. Ignoring it won't make it go away. Stay on top of it – it's your financial fitness tracker.
👍🏼 Diversify Your Credit Types
Variety is the spice of life, right? The same goes for your credit. Mix it up with different types of credit – loans, credit cards, and maybe even a small business line of credit. It shows you can handle a range of financial responsibilities.
👎🏼 Not That: Closing Old Accounts in a Fit of Spring Cleaning
Old accounts are like fine wine – they get better with age. Closing them might seem like decluttering, but it can hurt your credit history. Let those old accounts add some vintage charm to your credit profile.
👍🏼 Do This: Communicate with Creditors
If you're facing difficulties, don't be the ostrich with its head in the sand. Communicate with your creditors before things spiral out of control. They might be more understanding than you think and could offer temporary solutions.
👎🏼 Not That: Burning Bridges with Creditors
Ghosting your creditors when the going gets tough won't do you any favors. Be transparent, communicate, and work on solutions together. It's a partnership, not a one-night stand.
Building better business credit doesn't need to be complicated. By following these tips, you can demonstrate financial responsibility and position your business for long-term success.