Although most entrepreneurs will use their personal credit in order to get their business off the ground, they’ll need to build up their small business credit score if they have any ambitions of growing and expanding their business. There are several different agencies that develop business credit scores for lenders to use in order to determine the risk involved in providing credit to small businesses – one of the major ones being Dunn & Bradstreet.
Small business credit scores differ a bit from personal credit scores, even when it comes to how scores are rated. Dunn & Bradstreet uses a 100-point rating system in which anything above an 80 is considered a good score. The following are some of the basic ways that you should use in order to build your small business credit score:
- Always check for credit report errors – As you work on building your small business credit score, make sure that you obtain a copy of your credit report through Dunn & Bradstreet to check for errors. Errors can hurt your credit score and they occur more often than you might think. According to a study conducted in 2013 by the Wall Street Journal and Vistage International, almost 25 percent of all business owners discovered errors on their credit report. Should discover any errors, be sure to dispute them so that they can be removed.
- Pay your suppliers – Make sure that you pay all of your suppliers on time and in full according to the terms they have set forth. The payment experiences that other businesses have with your company is considered one of the biggest factors of your small business credit score.
- Make sure all vendor payments are reported – If you are paying large sums of money on time and in full to suppliers and lenders, then you’ll want to make sure that this is reflected on your small business credit report. Check over your credit report at least twice a year to make sure that these vendor payments are being reported. If it’s not, you should report this information yourself to help strengthen your small business credit profile.
- Keep your personal credit in good shape – If you are a new business owner, then make sure you keep your personal finances in order. Your consumer credit profile may be used by prospective creditors if your business profile hasn’t been built up yet.
- Keep your credit utilization ratio low – The higher your utilization rate is, the more of a risk you’ll be considered by lenders. You should aim to have a 30 percent utilization ratio or less. This shows lenders that you know how to manage your debts and that you’re not at risk of not being able to repay additional debts.
- Increase your credit limit – Request a credit limit increase six months after opening up a credit account for your business. By getting a credit increase, you’ll lower your credit utilization ratio, which will boost your credit score and make it easier for you to obtain large loans that you may need in the future to further expand your business.
These are a few of the effective ways that you can build your small business credit score through Dunn & Bradstreet, thereby improving your company’s standing with lenders and increasing your chances of securing the loans you need to grow and expand your business.
For more financial advice concerning your small business, including professional bookkeeping or tax planning advice, be sure to contact us at Valezar & Associates today.