4 Easy Steps to Improve Your Business Credit Report

Starting a business is not a simple task; you put a lot at stake, including the entire investment amount. And you often require a lot more money to expand your business, and at times like these, it may be a sound idea to make use of a business credit card.

Unlike a personal credit card, which is used only for personal expenses, a business credit card is used exclusively for business purposes. When a company issues a credit card to a business, it reports the transactions to established bureaus, and in turn, they produce business credit reports.

A business credit card acts entirely on its own, which means it is in no way linked to the personal credit of the applicant. They also have low-interest rates and help you get your loan amount easily. What’s more? There are no chances of being turned down by financial institutions because of the credit scores.

The credit reporting is done by the bureaus responsible, which helps establish your credibility. This eventually means that the investors use this report as a statement for your creditworthiness. This will, in turn, help you attract new businesses. However, all this may not be all that easy, so here are some steps to increase your business credit.

Keep a Check on Your Personal Account

The process of applying for a loan is the first step when you start a business. Before banks loan you money, they check your personal credit rating and make sure the credit score meets their requirement. Always remember to keep a track of your personal credit score. Make sure you pay your personal bills on time and ensure you have no debts. Even if you do, it should be at a low ratio. Every business credit bureau has a formula for calculating scores. However, a lender generates data differently as lenders usually check the personal credit score of an investor or business partner.

business credit report, credit reporting

Source: Thinkstock/milanvirijevic

Avoid High Debts

Always remember to keep a low debt level on your business credit card. Your business credit report should indicate that you are able to pay off your debt to a degree. Having a high amount of debt means your business is at a shaky stage, and you are not making enough profit and revenue. Apart from the owner of the business, the creditor also doesn’t like to see these low numbers as it reflects badly on the company. For this, one needs to keep the debt level at 20% of the credit limit, which will help up your scores.

business credit report, credit reporting

Source: Thinkstock/Jupiterimages

Establish Trade Lines

Another simple way of increasing your business credit score is by purchasing more. Buying materials and items from third-party vendors can help you build up a better business credit score. Suppliers often give the business owner the option of extending trade credit. This means that the owner can pay several weeks after he receives the inventory. If you develop this kind of understanding with the supplier, you can request him to report your payments to the business credit bureau, which will help increase your credit score. But remember to follow the guidelines of the trade agreement. 

business credit report, credit reporting

Source: Thinkstock/art-sonik

Establish a Relationship with Lenders

One must be careful when all the money is deposited into only one bank account because banks will change their lending policies overnight and cut down your credit limit without you noticing it. To avoid such a mess-up, you can use two separate banks. A small bank will help you secure your loan amount more easily as you can have a one-on-one chat with a representative more easily and closely, and he’ll help you get the amount on time.

These small banks can help you get your business credit score in good shape. This will be done when you make all your payments on time and when the lender reports to a credit bureau, and then the credit reporting is done. So always remember to ask your lender if he reports to the credit bureau timely and accurately. Big banks offer additional products and perks which might draw your attention towards them.

business credit report, credit reporting

Source: Thinkstock/AkilinaWinner

By building a good business credit score, you get lower-interests loans and also get a chance to establish a relationship with your suppliers. One needs to update business information with business credit bureaus and make payments on time. Don’t forget to monitor your business credit rating as it will help you save a lot of money.

Featured Image: Thinkstock/© AndreyPopov

Posted on May 5, 2023