How to Maintain a Strong Business Credit ScoreKaren Axelton
How To Maintain a Strong Business Credit Score
When you’re hustling to build your business, you know it’s crucial to have a good personal credit score. But did you know that your business also has a credit score, and that its strength or weakness can affect your ability to get financing, get credit from suppliers and vendors or even form partnerships? Here are five steps to building and maintaining a strong business credit score.
- Check your business credit score. Contact the three major business credit reporting agencies–D&B, Experian and Equifax—to verify your score and correct any errors. Unlike your personal credit score, business scores are rated on a scale of 0 to 100. Factors contributing to your score include your credit history and available credit. Generally a score of 75 is considered “good”.
- Get and use business credit cards and lines of credit to build a credit history. Smart Hustlers realize you need money to take advantage of opportunities. Ideally, you want to have a total of $100,000 in available credit, made up of several business credit cards and lines of credit. This way, if one card issuer or lender changes terms, it won’t cut down on your available credit. Never use more than 30 percent of your total available credit; this will ensure you still have plenty of available credit so that lenders won’t worry you’re overextending yourself.
- Pay your credit card bills and suppliers on time. Ask suppliers to report your payment record to the appropriate business credit reporting agencies (not all will do so automatically). Verify that your good payment history is showing up on your record by checking your business credit report regularly.
- Never use a personal credit card for business expenses. This might seem like a smart way to hustle additional funds, but it’s actually a big mistake. This not only mingles your business and personal spending, which can cause problems at tax time, but also prevents your business from building its own credit history. Working with a credit and lending expert can help ensure you choose a business credit card that reports to your business credit report.
- Last, but not least, keep your personal credit record clean, too. Especially for a startup or fledgling business, suppliers, lenders and card issuers will often consider your personal credit history before extending credit to your business.