If you're watching this, then you know that your business has a credit score that's separate
from your personal credit history and personal credit score.
Business credit is a very different animal from personal credit, and it takes a unique
set of steps to repair a damaged business credit score.
I'm Priyanka Prakash, a small business expert at Fundera.
I specialize in writing about credit and lending.
Today, I'm going to share five proven tips that will help you repair your business credit
score.
A higher business credit score will help you land more financing options, pay less for
financing, and get better terms from suppliers.
All in all, a good business credit score will give your business a leg up over the competition.
Let's start with a look at what makes up your business credit score.
There are three main business credit bureaus that track business credit scores: Dun and
Bradstreet, Experian, and Equifax.
Although each uses slightly different credit scoring models, you can expect four factors
to really impact your business credit score.
These are:
1.
Your business’s payment habits.
This includes the number and types of trade lines, the size of your outstanding balances,
payment history and credit utilization.
Trade lines might include business credit cards, business loans, and accounts with suppliers
of goods and services.
2.
Derogatory items.
The presence, amount, and recency of negative items on your business credit report such
as tax liens, court judgments, and bankruptcies affects your score.
3.
The number of business credit inquiries.
These are triggered when your business applies for credit and can also affect your score.
And finally, number 4.
Inherent business factors, such as the number of years you've been in business, the company
size, and industry.
You can find a copy of your business credit report and your score directly from one or
more of the business credit bureaus.
Now that you know what factors can cause a shift in your business credit score, we’ll
cover the most impactful five ways to repair a poor business credit score.
Tip number one.
Correct errors on your business credit report.
According to a survey by the Wall Street Journal, nearly 25% of business owners who check their
business credit reports found errors.
These errors could be responsible for your low business credit score.
Even something as simple as the wrong industry code for your business could throw off your
credit.
For example, let's say you make software for trucking companies, but the business credit
bureau accidentally categorizes you as a trucking firm.
That places you into a riskier category, and you could end up paying hundreds or even thousands
of dollars more for financing.
To correct errors on your business credit report, follow the agency’s process for
error reporting.
In most cases, you'll need to highlight the incorrect information on your report, provide
proof to show why there's an error, and either mail, email, or fax this documentation to
the agency.
Most investigations are completed within 30 days, though sometimes agencies like Experian
have a portal where a business representative can make certain updates immediately.
Tip number two.
Choose suppliers and lenders that report payments.
Small businesses that have been behind on payments in the past can repair their business
credit by showing timely payment behavior, but your positive payment history can only
be rewarded if you work with suppliers and lenders that report payments to the business
credit bureaus.
For example, if you are a retailer of household goods who buys inventory from a wholesaler,
ensure that the wholesaler reports to at least one (and preferably more) business credit
bureaus.
That way, every time you pay an invoice from your wholesaler on time or early, you'll be
building up your credit score a little bit at a time.
Uline, Staples, and FedEx are a few examples of vendors that report to the business credit
bureaus.
You can also apply for a corporate fuel card to add on an additional tradeline to your
business credit report.
Tip number three is to apply for a business credit card.
One reason for a poor business credit score may be that you simply don't have enough tradelines
on your account.
One of the easiest trade lines to apply for is a business credit card.
Even making small purchases on a business credit card and paying them off on time each
month can help you make big gains in your business credit score.
If you're unable to qualify for a regular business credit card, try a secured credit
card.
With a secured credit card, you put down a monetary deposit to qualify for a credit line.
Alternatively, you can apply for a corporate credit card from a big box retailer like Home
Depot or Lowes.
Tip number four.
Be cautious when applying for new credit.
If you're on the market for a business loan or business credit card, you could end up
in a catch 22.
You need financing, but every time you apply for credit, you get hit with an inquiry that
further damages your business credit score.
The key here is to only apply for a few lenders or credit cards which will be the best fit
for your business.
Do your research in advance to understand what you might qualify for.
Spread out your applications, and only apply for credit when you need it.
Never borrow more than you need.
With a single application which won't hurt your credit score, the team at Fundera can
help you figure out how much financing you can afford and the best lenders for your company.
Tip number five.
Keep your public records clean.
The final tip to repair your business credit score is to keep negative public record items
off your business credit report.
Items like unpaid business taxes, business bankruptcies, and court judgments remain on
your business credit report for years, and they can be very damaging to your business
credit score.
We suggest keeping a calendar of tax deadlines so you never miss one, and the moment you
start experiencing cash flow issues, try to cut back on business expenses or increase
your business revenue so you don't fall into a deeper hole and start missing payments.
If you experience legal trouble, contact a business lawyer right away.
Sometimes, these types of issues are out of your business's control, but you can take
steps to minimize the damage to your business credit history.
Those are our five tips for repairing your business credit score.
With these tips in mind, you can more confidently secure the best, most affordable financial
products for your business.
For more on credit loans and other small business topics, check out fundera.com/blog, and subscribe
to our YouTube channel for more videos.
Thanks for watching.