Finances

Credit score strategies: how to improve your score

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If you are a business owner, then you know how important it is to have a good credit score. A high credit score can give your company better rates of borrowing money and make it easier for you to get new lines of credit. This post will discuss seven ways that you can improve your business’ credit score so that your company has the best chance at succeeding long-term.

How does a credit score work?

Basically, the credit scoring methodology consists of gathering information about the borrower and using it to calculate what are the chances of him being able to pay the financing in the future.

The calculation of credit risk involves a series of consumer data, including age, sex, profession, marital status, number of dependents, address, income, etc. In addition, public information is also included, such as the default rate by region, Census data, labor market surveys, etc.

And most importantly: Data on the credit behavior of that consumer. This includes amounts of open debits, existence of lawsuit, number of consultations held, debits delinquent by creditor companies, etc.

The credit score system uses mathematical formulas and statistical tools to process all this information, assigning a score (note) to the person applying for a loan or opening a credit in the tradeThe higher the grade, the lower the risk the person poses.

How to improve your credit score

1.   Check Your Credit Report for Mistakes

You need to make sure that your credit report is 100% correct. A simple typo could cause a company to have an incorrect business credit score which can cost you money. Luckily, websites like Experian and Equifax allow you to get free copies of your own personal and business credit reports from each major reporting agency.

Once you have your credit reports in hand, take some time to go through them and make sure that all of the information is correct. If you find any mistakes, be sure to dispute them with the credit bureau.

2.   Pay Creditors On Time

Make sure to pay all of your creditors on time. This might seem like common sense, but many business owners make the mistake of paying their bills late or not at all.

If you are struggling with this right now, try setting up an automatic payment plan for each creditor that allows them to pull money directly from your checking account every month. This will help you avoid late payments and keep your credit score high.

3.   Purchase a Tradeline

One of the easiest ways to improve your business’ credit score is by purchasing a tradeline. A tradeline refers to any account that shows up on your personal or business financial statements, such as accounts for cell phone service, cable television service, or internet access.

The reason why adding these kinds of accounts will help you improve your credit score is because it will show that you are able to manage different types of accounts and pay them all on time. This will demonstrate to the credit bureaus that you are a low-risk borrower and should be rewarded with a higher business credit score.

If you don’t have any tradelines currently on your report, consider adding some. Make sure you do your research and read the tradeline supply company review to choose the best tradeline company. This will help you improve your business’ credit score by showing that you are able to manage multiple accounts and pay them on time.

4.   Personal and Business Credit Should Be Separate

Keeping personal and business finances apart is an important way to improve your business’ credit score, but this also needs to be done correctly by keeping them completely separate. This means having two different checking accounts, two different savings accounts, and most importantly, two different credit scores.

When you have a good personal credit score it will reflect positively on your business’ credit score, but when you have a bad personal credit score it will reflect badly on your business’ score as well. This means that you should keep the two accounts totally separate because one bad account can quickly affect your other financial responsibilities.

5.   Decrease Your Credit Utilization Ratio

Decreasing your credit utilization ratio can improve your business’ score in a big way. This means that you should try to keep your total available credit below 30% of the amount being used. If you have a high credit utilization ratio, it will show lenders that you are not able to handle different types of responsibilities and manage multiple accounts well.

Utilization is the amount that you owe compared to your total credit limits. For example, if you have $1000 in debt and a $1500 limit, then your utilization would be 50%. To improve this ratio try paying off some of your balances or requesting an increase on one of them.

Decreasing your credit utilization ratio is a great way to show lenders that you are low-risk and can handle different types of debt. This means that they will be more likely to approve any requests for funding or lines of credit in the future.

6.   Stay Current on Your Payments

You should only use the amount of credit that you actually need and try to make all of your payments on time. If you are constantly maxing out your cards or missing payments, it will show credit bureaus that you are not only risky but also irresponsible.

7.   Establish Credit Accounts With Suppliers

Another way to improve your business’ credit score is by establishing credit accounts with suppliers. This means that you should try to get vendors or suppliers to extend you a line of credit so that you can buy goods and services on account. If you are able to establish good lines of credit with different suppliers, then you’ll create a good history of borrowing and repaying the money.

Conclusion

There are several things you can do to improve your business’ credit score. By following these tips, you can increase your chances of being approved for different types of loans and lines of credit in the future.

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