How Small Business Owners Can Improve Their Credit Scores

Small business owners are entrepreneurs with creative ideas, passion and drive.

However, they generally aren’t accountants and may be unaware of how important business and personal credit scores are. We’ve gathered key information you need to know about establishing and maintaining good credit.

1) Personal Credit Score: Always Important

As a small business owner, your personal credit scores will be vital. Until you’ve built up a large business financial history, lenders and creditors will look at your personal score – it’s every bit as important as your business credit score.

Personal credit scores are tracked by any one of three major credit bureaus: Experian, Transunion, and Equifax. For a small fee, you can access the same information every creditor uses to evaluate your credit. You’ll also be able to see what information is negatively affecting your score. The website has great information about how your personal FICO score is calculated. Credit Karma also offers a free service, and they recommend steps you can take to improve your score.

2) Business Score: Establish and Maintain Positive Scores

Looking for a small business loan to grow your business? Actively managing business credit can help you secure more financing at better terms. Good business credit can also ensure that you get financing when it’s needed. According to the SBA, insufficient or delayed financing is the second most common reason for business failure.

The first step every small business owner should take is to determine whether or not they have a business credit file with Dun & Bradstreet. The company’s database contains information on more than 235 million companies across 200 countries worldwide. Find this out by visiting D&B Customer Service or calling at 1-866-785-0430. If you don’t have a business credit file, establish one by applying for a D-U-N-S® number. Businesses should apply for a D-U-N-S® number, a unique business identification number, as soon as they start their enterprise to start the process of creating a business credit file.

A good business credit score can also ensure that you get needed supplies at affordable terms. Suppliers evaluate your credit to make decisions about terms and how much credit to extend to your business. This can free up more money to help run your company.

*NOTE* Did you know that 15-30% of all commercial credit losses are due to fraudulent activity? Protect yourself against business identity theft by actively managing your business credit file. This ensures that fraudulent or incorrect information is not in the file. Additionally, monitoring your business credit file will make sure it truly reflects how good your credit is. You need to be aware of any inaccuracies and missing data so you can address them promptly.

3) Overall Credit Score: How to Improve and Manage.

Keeping your scores strong is actually simple. Here are basic steps you need to follow to establish and maintain good business and personal credit.

  • Pay your business bills on-time or before they’re due.
  • Build a positive payment history. Don’t overextend and use any line of credit carefully.
  • Monitor your business credit file and keep it up to date. By monitoring your business credit file, you will know right away of any change in your rating before it affects your relationships with customers, suppliers and financial institutions. Keep your file current including changes like location, number of employees and revenue.
  • Use credit wisely. Avoid the temptation to max out your available credit. If the goal is to improve your credit score, try to keep your credit card usage to below 15 percent of your available limit.
  • Monitor your customers’ and vendors’ credit. Monitor credit reports that provide an overall picture of the credit standing of your customers and vendors. This will help you to decide what terms to extend that are most favorable for your business.
  • Be skeptical of “credit repair” claims. There is no magic wand!   Anyone diligent in efforts at improving their personal credit score can see it improve 100 or so points in as little as six months.

How are your credit scores? If you've maintained high numbers, you can qualify for a low-cost SBA loan with a 10 year term. Visit SmartBiz today and discover in about five minutes if you’re qualified for an SBA loan.