4 Steps to Achieving a Good Business Credit Score

by on August 29, 2017

Finding the right financing deal is essential to the survival and growth of your business. However, this is not easy to achieve if you have a poor business credit score. Your business credit score can have a significant impact on your ability to secure a favorable business loan. If you want to get the best financing deal possible, you need to take the necessary measures to achieve and maintain a good business credit score. Here’s how.

1. Keep Your Business and Personal Finances Separate

Similar to other business owners, you will want to incorporate your business one day. However, even if you you are a sole proprietor now, you should obtain an employer identification number (EIN), register your business with state or local agencies, and apply for the proper business licenses. Make sure you consult a tax advisor before your change the legal structure of your business. Instead of using your personal bank account and credit card for business purposes, open a new account and card under your company’s name. This is to ensure that your personal credit will not be put on the line when you apply for a business loan.

2. Start a Business Credit Account

In order to establish a business credit history, you need to have a credit account that reports your payment history to commercial credit bureaus such as Experian and Dun & Bradstreet. It is easy to get a business credit card if your personal credit score is good. A survey conducted by Manta and Nav found that more than two out of three small business owners had not obtained a dedicated business credit line. Having a business credit account will give you an edge over your competitors, because it makes it easier for you to get funding.

3. Pay Your Bills On Time

Payment history is the most important consideration to most commercial credit scoring models. If you want to have a good business credit score, you need to consistently pay your bills on time. Some lenders may evaluate your income and cash flow to determine your ability to pay your loan, so it is important to maintain a solid cash flow. However, this will not have as significant an impact on your credit score as your payment history.

4. Check Your Credit Reports Regularly

Errors in your credit reports can hurt your business credit score and undermine your ability to get a business loan. As such, you should check your credit reports regularly to make sure that they are error-free. If you notice that your business credit score has dropped suddenly and inexplicably from one month to the next, it is likely that there is a reporting error.

Achieving a good business credit score requires substantial effort and discipline, but the potential rewards it brings make it a worthwhile endeavor.

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