A business credit score is a number that rates a company’s creditworthiness on a scale from 101 to 992. A higher score means the company is more likely to pay its debts on time and in full. A poor score, however, sends a red flag to lenders and vendors that the company is a high risk for default. Missing payments, taking on too much debt, and frequent changes in ownership are just some of the things that can affect a business’s credit score. The first step is incorporating your company and obtaining a federal tax ID number (EIN). This separates your business from you as a person. It also helps you qualify for better loan terms when it comes time to apply. Next, you should open accounts with creditors that report to business credit bureaus. Making payments on time and in full will help you build a strong business credit history.
How Can I Build my Business Credit in a Month?
The most effective way to build business credit is to make consistent and responsible borrowing decisions. By demonstrating your ability to manage debt in a variety of accounts responsibly, you’ll see your business’s Experian credit score climb. Additionally, it’s important to monitor your business credit and keep a close eye on the balances in your accounts so you don’t exceed your company’s credit limits.
You should also work to improve your company’s credit utilization ratio, which measures how much of the available credit you use. If you find that your company is maxing out its credit cards, try to pay them down or ask lenders that appear on your business’s credit reports for higher credit limits. It’s also important to establish and maintain a business bank account. This will help you separate your personal finances from your company’s and improve your chances of getting approved for loans or lines of credit.
Additionally, you should submit your company’s information to the three main business credit bureaus by requesting a DUNS number. Finally, be sure to focus on vendors and suppliers that report your company’s payment activity to the major business credit bureaus. This will help you build a positive business credit history and increase your likelihood of securing financing.
It can take some time to build a robust business credit profile and score, but as long as you follow the above best practices, you should see positive strides in your business’s financial credibility. As with building personal credit, it’s also a good idea to not rush into too many credit applications over a short period, as this can negatively impact your business credit scores. If you’re in a hurry, consider getting a Nav tradeline to bolster your business’s business credit report and boost your approval potential with lenders and suppliers. Nav’s tradelines are available for both new and established companies and can be used to amplify a business’s borrowing power, strengthen its credit history, and increase its eligibility for financing.