If you’re running a business, then you have both a personal and business credit score. These scores play a big role in things like:
If you don’t have optimal personal and/or business credit, there are some steps you may be able to take to prevent it from harming your business financially.
Improving your credit is something you want to do diligently. Here are some things to consider:
The first step in improving your credit is knowing what your scores are. Credit monitoring is also important because mistakes can happen, and, occasionally, you may find errors on your credit reports. Sometimes, it may be fraudulent activity. Other times, it may be just an error. Regardless, it’s crucial that you have them corrected or removed in a timely manner.
Some major credit reporting agencies to check for a personal credit report are:
Each maintains the credit files that determine your personal credit score. (All of this information is protected by the Fair Credit Reporting Act (FCRA).)
For a business credit score, consider checking with:
Dun & Bradstreet®
Your personal credit score affects your business because many lenders are going to check it! This is especially true if you plan to apply for an SBA loan since the SBA consults the FICO® LiquidCredit® Small Business Scoring Service℠. A higher personal credit score indicates to lenders that you’re more likely to pay off your debt.
You can generally get a free credit report every 12 months from each of the three major consumer reporting companies.
What are some ways you can improve your personal credit score? As mentioned, check it for errors so that you can address them. Aside from that, pay your bills on time every month, and make sure you’re in good standing with any current loans.
You also want to consider using your credit cards wisely by not opening too many in a short period of time, avoiding closing accounts, and keeping your balances low. This generally helps keep your credit utilization rate low, which can often help your overall credit score.
Because these two scores can influence each other, you want to keep them separate as best you can. That way, if one is negatively impacted, the other likely won’t suffer as a by-product. Here are a few tips to keep in mind:
If your business credit isn’t looking too good, getting a line of credit from a financial institution might not be feasible quite yet. What you can consider doing instead is getting a line of credit from your suppliers and vendors that report to the agencies. If you make these payments on time, you’ll likely build up a positive credit history, which may boost your business credit score.
There are specific business credit cards for bad credit that you may want to consider if your credit score is low. Some of the benefits are:
We all start somewhere. If your credit is struggling, consider taking action as soon as possible.
Rome wasn’t built in a day and neither is credit. It may take weeks, or even months, to see improvements to your credit once you start changing certain behaviors. Be diligent and consistent - your business will thank you for it.