According to statistics, more than 75% of Americans have a credit score below 700. If you’re one of the many who have credit scores below 700, there’s no time like today to take the steps needed that could have an impact on your business’s credit score. There are some simple guidelines that can help you build and maintain your company’s creditworthiness
Paying on time is one of the most important habits to develop when you want to establish your business creditworthiness. It builds good relationships between you and your creditors, resulting in better terms and stronger purchasing power. Payment history accounts for 35% of your credit scores and is a contributing factor in the makeup of your company’s credit rating.
Create a separate bank account and obtain a business credit card. Be sure to keep good records and document all business expenses. Good records keeping allows you to become a better bookkeeper for your business, making it easier during tax time. A business credit card is a valuable tool for building your business credit, managing expenses, and separating your personal and business expenses. With a business credit card used solely for company purchases and expenses, you eliminate the risk of damaging your personal credit rating.
Don’t just pay the minimum amount due and don’t max out your cards. It’s important to pay more than the minimum amount due whenever possible. This will help reduce your overall balance, which improves your credit utilization and raises your score. This also helps prevent your debt from piling up since your chipping away at the overall balance. The percentage of how much you owe compared to the amount of your credit limit is known as credit utilization. Keep your ratios below 40% to maximize your credit score potential.
Intangible assets such as your company’s reputation, social capital, brand, and intellectual property, are important and valuable to a company. By keeping your company’s creditworthiness high, you are also protecting your business.