3 Secrets to Fixing Your Business Credit Score
You know all too well how important a credit score can be. Those three digits dictate everything from what you drive to where you live and even where you work. However, did you know your business also has a credit score? The same factors that contribute to your personal credit history also make up your business profile as well.
If you have too much business debt or the debt is not handled correctly, it may hinder your ability to obtain the financial help necessary to grow your business in the future. All is not lost. Fixing your business credit score is just a matter of following a few simple steps.
Pay Bills On Time
Paying bills when they’re due is one of the most significant contributing factors to your overall credit score. Financial institutions see slow or late payments as a sign that you are not able to adequately handle finances. If you are unable to make all your payments on time, you need to sit down and figure out what it will take to be able to do so. Increasing your income in any way and cutting expenses is the best method of being able to pay back lenders timely.
Keep Your Personal Finances Separate
If you’re new to running a business, you may not know that keeping your personal and business finances separate is crucial. Doing so will ensure that your own financial situation will not affect or be affected by your company. Keep bank accounts and records utterly separate from the very start.
Don’t Use Too Much Credit
Borrowing money through lenders or using a credit card will impact your debt to income utilization ratio in both personal credit and business credit. As in your personal life, utilizing only one-third of your available credit in your business will help boost your credit score. For example, taking out a business loan for $100,000 but just using $30,000 will give you the ideal debt to income ratio. It also allows you to keep that extra line of credit open in case of an emergency down the road.
While it doesn’t always seem fair that so much is determined by a credit score, being able to handle your finances will ensure your business is thriving. If you are prone to mishandling money or getting into debt easily, you may want to consult a financial advisor or another financial professional who can help. Being able to come up with a debt management strategy may be just what your business needs for long-term success.