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.
7 Ways to Fix Your 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 pay all bills and loans on time – or early if you can.
- 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.
- Reduce outstanding interest-bearing balances: If the amount borrowed on your revolving business credit line has gotten large, reduce those outstanding interest-bearing balances. Make these payments even if you have to partial pay some of your trade suppliers for a couple months until the revolving credit balance is back to normal.
- 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.
- Keep business and personal accounts separate: To have established business credit, personal and business accounts must be separated. If you have a history of co-mingling your business and personal expenses, now is the time to put that to rest.
- Correct errors in your business credit reports: Finding errors in your business credit can take a bit of detective work. If you are up for the challenge, start with the basics. Look on each report to see if your company information is accurate. The bureaus pull most of their information from public records and creditors, since there are no laws forcing them to report correct information, the data might be wrong or outdated.
If scores are established, try to identify which creditors are reporting. With business credit, the bureaus are not required to disclose the creditors names. Vendors are usually identified by codes on credit reports – this means more detective work.
Don’t overlook small errors – sometimes EINs will have an incorrect digit or companies with similar names get mixed up. There are many small factors that can mean major disaster to your credit!
- Get help from an expert: Reviewing your business credit profiles can be daunting. Personal credit reports pale in comparison. Dun & Bradstreet alone has 7 different scores / indexes on each report and that is just ONE bureau. Depending on your industry, there may be up to 9 credit bureaus that you need to worry about. It’s easy to say that you can fix your own business credit, but when faced with the reality, it is no wonder why so many business owners seek help from credit experts.
The experts at North Shore Advisory are here to help. Call 914-524-8300 or fill out the form on this page to speak with a certified credit expert.