All business owners understand that having a strong credit rating opens doors to everything from greater spending limits on unsecured lines of credit to better financing opportunities. However, very few small businesses actually take time to research how to improve their credit ratings. Some things that might seem like common sense do not improve credit ratings at all, while others are only considered right before businesses apply for loans, when they should be done regularly.
If You Have Business Credit Cards, Use Them
Small and emerging business owners like to keep company expenses to a minimum, and often see business credit cards as things that create just another bill. The truth is that if credit cards are left unused, small businesses will only see their credit ratings stagnate. It is even possible that the credit card accounts will be flagged as “inactive.” By using business credit cards – even for small purchases – and then paying the balance off on or ahead of time, credit ratings will improve.
Not All Vendors Will Improve Business Credit Ratings
There is a common belief that keeping up with invoices from vendors and suppliers will help to increase credit ratings. This is only partially true. While paying bills on time is an excellent practice, not all vendors report their information to credit agencies. Before working with vendors, ask them if they report their information. If they do, then placing orders with them and paying their invoices will improve the business credit rating. If they do not report their information, then you should keep shopping around for other vendors.
Regularly Review Credit Reports
Credit reports usually only take a front seat when a business is applying for a loan, but they should be reviewed every month or so, to monitor the strength of business credit rating, and to ensure there is nothing unusual on the report. Credit agencies are very large organizations, and sometimes things get reported incorrectly from other businesses, which can cause a black mark to show up on the business credit report. Similarly, previously outstanding balances can linger on credit reports when they should have been removed a long time ago. By reviewing business credit reports regularly, you can spot these errors and reach out to the agencies to get those things removed.
By following the steps above, small businesses will be able to improve their credit ratings, and access new financing opportunities to take their operations to the next stage of developmental success.