How To Maintain A Favorable Credit Score As A SME

Five ways in which an SME can maintain a favourable credit score

1. Make timely loan payments: Credit bureaus look at your history of making payments to the lenders to assess your credit report. To maintain a good score, it is pertinent that all the dues – loans and credit card bills - are paid before the deadline. In fact, if the repayments are made a little early, it reflects positively on the report. Similarly, late payments have a negative impact on the credit score. A major default or bankruptcy claim can ruin your credit score for years.

2. Update your business information regularly: As a business owner, one has to keep an eye on the credit score reflected by every credit bureau as one cannot be sure as to which report the vendors, creditors or customers might be checking. Needless to say, one has to try and maintain a good record across all the credit bureaus. To make sure these reports are reflecting the correct facts, the business owner should keep updating the information about the size of the company, number of years in operation, bank statements, balance sheets, etc. regularly as an up-to-date profile gets the higher credit score. Also always monitor your credit scores by different bureaus to take corrective measures in time.

3. Partner with lenders who report to credit bureaus: All your efforts of repaying bills and loans on time will have little effect on the credit score if the lenders don’t report that to the credit bureaus. So, before you enter an agreement with a creditor or a supplier, make sure they will be reporting about your payment history and habit to the bureaus.

4. Keep a check on your enterprise credit utilization: How you utilize the credit also determines the business credit score. Overutilization of credit gives the impression that your business is having trouble making profits. As credit utilization increases, the credit score goes down. Also, limit your credit applications. 

5. Make sure that your personal credit is intact: Though finance experts recommend keeping the business and personal credit separate, it is vital to keep repayments strong and steady in both cases. In the initial days of business especially in cases of startups when the business has little or no credit history, business loans or credit cards are sanctioned on basis of personal credit score.

Get your finances back on track first to gradually build up your credit report. The credit score will improve over a period of time by keeping your finances in check, avoiding defaults on loans and maxing out your credit cards etc. Once a decent score is achieved, it is necessary to maintain it as future business deals and the company’s credibility depends on it. It may appear difficult at first but with discipline, a high credit score is quite achievable and with a strong credit report, the business can make bigger breakthroughs.