Amidst trying to scale their venture, one of the mistakes that small business owners make is not paying attention to their credit ratings. Many of them do not know that a good credit rating increases their chances of accessing funding like business loans, lines of credit, etc.
In this post, you will learn some tips on improving your credit report and maintaining a good credit history.
Table of Contents
What is a credit history, and why is it essential for small businesses
Credit history is a detailed record of a person’s previous credit management, like loans and credit cards. Your credit history comprises vital information like the number of opened and closed accounts. It also shows your payment history and whether you were prompt with payment.
Before opting for credit from lenders for your small business, you need to ensure that your credit history is in good shape. It is important to mention that using your credit responsibly will positively impact your credit score.
Ways to improve your credit report and get benefits for your small business
If you want to increase your chances of getting credits and loans at the best rates for your small business, you need an outstanding credit report
Here are some tips you should implement to improve your credit report
-
Make payments early
When you settle your accounts early, you prove your reliability to lenders. They will be convinced that you can handle your credits responsibly. Making payments on time will also improve your credit score, increasing your chances of getting credits and loans.
2. Apply for the credit you need
Some people mistake applying for credit just to confirm if it would be approved or not. When you apply for credit, your report receives a hard inquiry, which temporarily reduces your credit score.
To avoid this trial and error method, research your prospects of getting approved if you want to apply for a new line of credit. You can opt for a pre-qualification to get a soft credit pull instead of a hard one. Another habit of avoiding is to stop applying for many credit cards in a short time before you take small business loans.
3. Always check your credit report
As a small business owner looking to get credits, ensure you get your credit report from a notable credit reporting company. These reports contain your credit score that shows your chances of getting credits and loans. Additionally, you will see the information needed to improve your credit score on your report.
4. Dispute inaccurate information and errors
If you regularly check your credit report, you can tell if there are inadequacies or not. When negative feedback on your credit file can affect your credit report and credit score. The same applies to unpaid accounts and complex inquiries, adversely impacting your credit report.
Tips for maintaining a good credit history
Maintaining a good credit history is quintessential if you want to apply for credits or loans as a small business owner. Hence, you need to use the right tips to ensure that you remain in good standing.
You can do many things to keep good credit history, but some of these hacks will increase your chances.
1. Develop a good relationship with creditors
It is vital to understand that creditors are also humans. Therefore, keep in touch with your creditors and communicate when necessary.
If you face some financial challenges that could delay debt repayment, always reach out to them early. You might be lucky to renegotiate a lower interest rate and a more flexible payment schedule.
2. Live within your means
One of the reasons people have a poor credit history is that they exceed their credit limit. Ensure that your credit card debt is not more than your yearly income after taxes deduction. It is also advised that your credit use should not be more than 30% of your total credit limit.
3. Ensure your credit card balance is low
If your credit card balance is high compared to your credit limit, it can affect your credit score. Always monitor your accounts and make sufficient payments to bring your balance close to $0 before the end of the billing month.
A good credit score means you can get loans and lines of credit
Getting a good credit score is quintessential to your business’ success. With a high credit score, you have access to more small business loans or lines of credit. On the other hand, a low credit score reduces your chances of borrowing money. Hence, if you are looking to get business financing, you should be keen on improving your credit score.
Conclusion
With the tips mentioned above, you will be able to build and make your business credit rating much better. Apart from getting access to big business loans with a good credit report and history, you stand a chance of benefiting from favorable terms. Additionally, to know how to access small business loans, click the link in the introductory paragraph to get started.
