During commercial transactions, business credit will be used to determine creditworthiness and risk. In order to win bids, gain new trade partners, open new accounts, and take out loans, your company must be able to display a strong credit profile. Most lenders have minimum credit requirements when issuing financing, if you do not meet their parameters, they will deny you with no explanation. If you want to win major bids and be prepared for the best types of loans, it is essential to plan by reviewing each credit report in case you need to fix business credit or build up a thin profile.
Listed below are 3 simple ways to fix business credit:
- Pay your bills on time: This should go without saying, but late payments happen whether you intend them to or not. The best way to re-establish and fix bad business credit is to stay current on all your accounts. Also, make sure you get up to speed on any past-due accounts. Develop a plan going forward to maintain timely payments.
- Keep credit utilization low: Credit is a double-edge sword – you need credit in order to build credit, but if you use too much it will hurt the scores. Calculate your debt utilization ratio, it’s ideal to stay below 10% especially if you’re looking to get approved for more financing. If 10% is unrealistic for your company, aim for a 30% debt utilization ratio.
- Open new ‘healthy’ credit lines: You can try and push down the negative by establishing new healthy accounts. New lines of credit will help fatten your credit profiles and strengthen your scores given that you make all your payments on time.
If you do not start fixing credit and developing healthy spending patterns, you may find yourself only eligible for high-interest financing and miss out on profitable opportunities. Bad credit business loans have interest fees at 20% or more. Increasing or establishing credit scores is not a quick fix, it cannot be done overnight, but with careful planning and simple changes you will be on the road to better business credit.