How to Improve the Credit Score for your Business

How to Improve your Credit Score?

A high credit score is favorable for any business in the long term as it enhances growth and increases competitiveness. While improving your credit score is not an overnight process, you can take immediate steps to increase your credit score.

Here are six ways to improve your business credit score:

1. Study the Credit Report

The first action towards improving your business credit score is to study the credit report in detail. Chart out the areas in need of improvement and any disputable points on the report to plan your action. Reorganise and address all the areas of concern, which can immediately boost your business credit score. It is recommended to review your business credit report regularly and understand the impact of different credit accounts on your credit score.

2. Paying Bills on Time

This factor has a major contribution in the calculation of business credit score. Delays in payment of bills will adversely impact your business credit score and hamper the reputation of your business. Inculcating the habit of paying dues well before the due date will enhance the reputation of your business and improve credit score.

3. Limit Credit Usage 

The credit utilisation ratio shows the current usage of revolving credit compared to the sanctioned revolving credit limit. While it is important to have open credit lines for business growth, it is advisable to keep the rate of utilisation below 30%, to maintain good credit score.

Here are ways to Lower Credit Utilisation Ratio -

• Pay off some of your credit balances
• Increase your credit limit
• Pay off your bills more than once a month
• Decrease the money spent on credit-basis
• Open a new credit line, but do not use it

4. Check for Errors and Dispute them

Working with credit reporting agencies and lenders to dispute any error and remove negative comments is an important call to action. A simple error can leave a massive dent in your credit score. Therefore, it is important to make sure that the information reported in the credit file is error-free and up-to-date.  

5. Establish Credit Lines with Suppliers

Establishing new credit lines with suppliers with whom you have a good payment relationship will improve business credit score. This helps to increase the number of positive payment cases in your credit file, which will improve your credit score.

6. Avoid Closing Old Credit Lines

Closing your old credit accounts and removing it from credit files is not advisable and this is one of the most common mistakes small business owners commit. A credit account maintained for several years shows signs of confidence in your business and indicates stability. A general thumb rule is that, the older the account, the greater the positive impact on credit score. Removing it from your credit file adversely impacts the credit score as favourable credit history is lost.
 

Conclusion