How to Improve Your Business Credit Score

Improving Your Business Credit Score

Maintaining a good credit score is important for any business, but when you’re considered high-risk, it’s absolutely crucial. Good credit is necessary for any business that wishes to receive a loan, pay fair interest rates, and perhaps most importantly, to maintain a positive reputation with the financial institutions it deals with.

Businesses with bad credit are, at best, usually required to pay high interest rates on loans and lines of credit and in the worst case, may be unable to obtain loans, bank accounts or payment processing accounts. While high risk merchant accounts may be available to businesses with poor credit, there are some situations where even a payment processor that specializes in high-risk merchants are unable to open accounts for those with bad credit. Often sole proprietorships, small businesses and new businesses rely on the owner’s personal credit history to obtain accounts and loans and when the business can’t maintain a positive credit rating, the owner’s personal credit suffers as a result. This is why it’s so important for businesses to maintain or work towards good credit.

If your business’s credit rating is sub-par, there’s still hope. It’s actually quite easy to repair credit by following a few simple steps and maintaining good financial habits. Read on to find out the best way to repair and improve your business’s credit score.

6 Ways to Improve Your Business’s Credit Score

Increasing your business’s credit score is surprisingly simple. By obtaining and monitoring your credit report from each of the three big national credit agencies: Experian, Equifax and Dun & Bradstreet, you’ll be able to effectively learn where your business’s financial health stands and formulate a plan to get your business on the path to good credit.

1. Establish Your Business Credit

The first step to improving your business credit score is to simply establish all of your business credit scores – that’s right, you will have multiple business credit scores, and you have to take certain actions in order to establish them. Personal credit scores are calculated by the same criteria and scoring system set forth by FICO, but the three business credit scoring agencies are more disparate in their calculations, and their scores all signify different things. Only once you establish credit with each agency can you work on improving these scores.

2. Register Your Business and Apply for Titles

If the information credit agencies have about your business is inadequate, they may be unable to accurately determine a credit score for you and without credit, your business won’t be able to obtain credit products such as loans and lines of credit and your customers may be unable to find reliable information about your business’s reputation. By registering for a federal employer identification number and incorporating your business or registering it as a Limited Liability Company, you’ll be able to establish your credit and ensure that your personal finances are kept separate from your business’s.

3. Use Your Business’s Name on All Financial Accounts

While it may be tempting to use your personal accounts for business, it can hinder your business’s ability to build a strong credit history and financial reputation. Instead, open separate bank accounts, credit cards and utility accounts (especially your phone line) under the name of your business.

4. Use Your Credit, Pay Your Bills on Time and Maintain a Low Debt-to-Credit Ratio

Once you’ve opened your business accounts, make sure that you use the credit that you have and pay your bills as soon as they’re due. Keep debt levels low, especially on revolving credit accounts such as credit cards and lines of credit. These practices reflect that your business is able to responsibly use credit and maintain healthy financial habits.

It can also help to work with other vendors and maintain invoicing accounts with them to demonstrate your business’s ability to pay debts on time.

5. Monitor Your Credit Report for Inaccuracies and Negative Remarks

If your business has a bad credit history already, it’s crucial to monitor its credit report on a regular basis for inaccuracies and negative remarks. By contacting credit agencies, it may be possible to have these things removed from your credit report after a certain amount of time has passed.

6. Obtain a Business Loan

Loans are a fantastic way to build credit. Unfortunately for businesses with poor credit, loans may be nearly impossible to obtain, but once credit has been established or improved, a loan can demonstrate a business’s ability to repay debts and maintain a positive relationship with creditors.

Obtaining Merchant Services with Bad Credit

For businesses with poor credit, obtaining merchant services can be difficult. This is particularly true for merchants that operate within a high-risk industry. In these situations, it may be possible to obtain a high-risk merchant account from a payment processor. High risk merchant accounts exist specifically to provide alternative payment processing options to businesses that are otherwise unable to obtain merchant services. At PayDiverse, we specialize in these types of accounts and offer a broad range of account services that specifically cater to the unique needs of high risk merchants.