A strong business credit report is an important asset for any small company. With it, a business has the potential to access the capital it needs. A good credit report can also help a business secure the best pricing for supplies and inventory and take advantage of opportunities as they arise, especially as the holiday season approaches.
These five tips can help you improve your credit rating:
- Get your hands on your credit report The first step toward strengthening your business credit report is to get a copy. Some business owners feel too busy to focus on this task; others avoid it because they are afraid of what the report might contain. While understandable, this “head in the sand” approach can hinder your company’s ability to thrive. Prospective capital providers and vendors may review your company’s credit score with the various business credit bureaus. Since a credit report is widely viewed as a good predictor of a business’s likelihood to pay its bills and stay healthy, those firms will likely place a lot of stock in it. You can order a copy of your report from the major credit bureaus: , and . If your business is “young” and the credit bureaus don’t yet have a profile on you, create a business profile on their sites with all of your current information.
- Update basic information Once you get your report from each credit bureau, be sure the information is correct and up to date. Check for accuracy on basic information such as your business name, contact information, industry and years in operation. Also be sure your report accurately reflects your business incorporation status if that has changed over time. Credit bureaus rely on businesses to self-report this information, so the responsibility lies with you to keep this information current. Establish a time each year, if not more frequently, that you plan to check your reports for accuracy to ensure that they always reflect your current status.
- Check your credit rating and payment history Each reporting bureau will assign your business a rating, or score, based on your revenues, the amount of debt you carry and other factors. The various reporting companies each have their own scoring scale and system, so be sure you understand what each score means before setting out to make changes. An essential component of your credit score is your payment history. Check that your reports accurately reflect important payment details since the reporting companies rely on your vendors to communicate this information to them.
- Fix any mistakes If you have unpaid bills or collections actions on your credit report, pay up to start building a better profile. Unless something is in your credit report mistakenly, you can’t remove it. Instead, you build a better profile through responsible payments. This positive payment history is the best antidote to credit report weaknesses.
- Build your payment history Ensure that all of your major payment relationships are represented in your credit reports, since your profile will be based in large part on these habits. Your company credit will look strong if you pay your bills on time, or ideally early, over a period of time. Also review your payment history to identify actions that may raise a red flag to potential creditors. Activities as simple as shifting from paying in full each payment period to making only minimum payments may signal financial trouble. In some cases a business will benefit from having more debt relationships to demonstrate good repayment habits. Consider this if your business has a minimal debt repayment track record because it is new or in good financial health.
The time and effort you put toward shoring up your business credit report will pay off now and in the years to come. A strong credit report positions your company to take advantage of opportunities as they arise during the holiday season and reach the full potential of your small business.