Having a good business credit score takes you halfway through the process of business loan approval. Most lenders consider your credit score as one of the deciding factors for loan approvals. Businesses can request credit bureaus to get their credit information and credit scores. Credit scores vary from 300 to 900, with a score of 750 and above considered as the recommended score.
A higher credit score means that your business has higher chances of getting the business loan at reasonable interest rates.
5 ways to raise your credibility
On-time bill payments: Paying bills on time aids in improving your credit score. Late payments can impact the credit score negatively, especially if the lender chooses to report the business. Paying bills and invoices surely needs time for cashflow management but it can pull your credit score higher. Credit agencies review your payment history and prompt payments can be a good thing.
Note that if the late payment is marked on your business credit profile, it will remain there for 6 years.
Maintain low credit utilization ratio: Low credit utilization ratio means the ratio of the amount withdrawn versus the total available OD. 30% is the acceptable credit utilization ratio for most of the credit bureaus. Credit score starts falling if the ratio increases beyond 30.
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Check credit report regularly: Not checking the credit score is a mistake that many small businesses make. Raise the request for your credit report with the credit bureau, and they can compile it for you based on information about your company available on the public domain. Reviewing your business credit report periodically is an excellent way to check for any errors and inaccuracies. If you observe any inaccuracy, report it right away. Errors like unpaid debt on your report that you already paid can be rectified and removed from the report. It is a crucial step to improve your credit score.
File taxes on time: Always file your tax returns and returns on time as it can show your business’s financial stability. Late filings can be a bad sign for most of the lenders.
Keep old business credit cards: older credit cards indicate the stability of your business. Old credit cards can provide a comprehensive understanding of your business’s payment history to the credit bureaus. If your business has more than one credit card and you want to cancel one of the cards, it is always advisable to cancel the latest one with the shortest payment history.
According to a survey by Federal Reserve, 27% of SMEs face low credit score issues. founderscard is a business credit card for startups that face cash crunch while building their business. Contact us to know more.