As a business, any time you apply for a loan or other financing product, a cautious lender will most certainly consider 2 things to determine whether you’ll qualify for their services – your business credit score & your business credit report. They’ll also use these parameters to decide on the interest rate and the terms offered to you. To have a good credit score, you need to have a sound credit history and the best credit history is one with regular repayments but for repayments, you need to have a credit account – which brings us back to square one. Our article here will discuss how you can break through the cycle of credit and pedal your way to a great credit score!
1. Register your business:
The very first step to getting a business credit score is to legalize and register your business. Many small businesses run merely as an extension of the proprietor’s person but registering your business lends it an individual identity, separate from the owner. If you are already through with this step, well done! You are now empowered to start building your business credit score, brick by brick.
2. Use a credit card to fund your credit history:
Every lender leans on your credit score while deciding whether to lend you a loan or not, and for a good credit score, you need to have a decent credit history. Credit history is built primarily on loans and credit cards and since loans are more difficult to get in the absence of a credit score, you may start with a credit card. Using credit cards, you can finance the smaller and immediate expenditures of your business. The trick is to stay proactive in paying back the dues, even before the bill reminder strikes. This will make sure you come across as prudent in payments and will also render a kick start towards a good credit score. Lenders love consistency and would happily lend you a loan in the future.
3. Keep personal credit score as a backup:
Small businesses are often driven by sole proprietors – which means there is no separation between the owner and their business. Hence, the owner’s capital is also the business’s capital. So when such a business applies for a loan, the creditors also consider the owner’s personal credit score especially in the absence of a business credit report & credit score. In case the owner has maintained a clean record of credit histories, such as no defaults or late payments, then these deeds might come handy when applying for a business loan based on your personal credit score.
4. Work with vendors who report payments:
If there’s a way for you to know, use vendors that will report your payments to the business credit bureaus. No need to break a sweat though as many of them do report, so you shouldn’t have any trouble finding them.
5. Monitor your business credit reports
Get into the habit of checking your company credit report & credit score at least a few times a year. By regularly checking them, you are aware & in control of your finances. You get enough time to rectify and take corrective measures if you feel you are drifting away. Also, there can be chances that an incorrect or obsolete record still exists in your report which is affecting your score. In case you find any errors or inaccuracies, you can dispute them immediately.
To check out your company credit score and credit report right away, simply visit the CRIF website, fill in your details, and download a copy for your records. Remember that with assured finances & a solid credit to bank on, your small business will have a secure future!
