If your business is young, its credit history may not impress many lending institutions, who typically look for long borrowing histories when evaluating the creditworthiness of a business. Don’t despair, however—building up your credit isn’t out of your hands. Get the jump on growing that business credit with these specific, actionable strategies for improving your business’s standing with credit agencies.
How Good Is My Business Credit, Anyway?
Your business credit score, like your personal credit score, is a number generated by credit bureaus describing your business’s trustworthiness when it comes to borrowing. Business credit scores vary from agency to agency, more than personal credit scores. Your business’s credit history is also publicly available, unlike your personal credit history, meaning anyone (including your competitors) can pay to view it.
Dun & Bradstreet, Experian, and Equifax are three of the most prominent business credit agencies, and each one will evaluate your credit differently. Once you select a bureau and pay for a credit report (anywhere from $40 to $100), you’ll receive a score from 1 to 100. (There are other scales—FICO uses a different scoring system, for instance—but 1-to-100 is common.) If your score falls under 75, you’ve got work to do.
Here’s how to quickly boost your business credit.
1. Start paying your bills on time (or early), immediately.
The simplest way to build strong credit is by paying punctually. Payments towards your rent, utility bills, business credit card statements, and other monthly expenses can all have an impact on your credit score. Consider setting up automatic payments, and pay early (20 to 30 days before the deadline) whenever possible. If you find yourself unable to make a loan payment on time, you can always ask your lender to clear the late payment with a “good faith removal,” which they may grant you if your track record as a borrower has been excellent.
2. Set up a strong credit profile.
Apply for your very own DUNs number through Dun & Bradstreet, and take charge of managing your credit profile. Once you’ve received your unique DUNs number, you’ll be able to update your business’s profile and view any public financial information D&B has gathered on your business, including liens, financial reports, registrations, and more.
Keep this profile up to date as your business grows. That includes adding trade references—vendors and suppliers with whom you have a positive payment history. Favorable trade references can do wonders for your business credit if your borrowing history leaves something to be desired.
3. Check for errors in your credit report.
As many as 20 percent of Americans—one in five—have errors in their credit reports. If a credit bureau claims you’re delinquent on a bill you’re sure you’ve paid, first check with the institution you allegedly owe, and then gather the documentation you’ll need to dispute the error. Statements, receipts, and correspondence will all help you make your case to the credit bureau and clear the error. It may take anywhere from one month to six weeks before you hear back from the bureau, so check your report immediately if you’re worried you might be a victim.
4. Open a new, different line of credit.
Taking on more debt might seem counterintuitive, but diversity in your lines of credit looks good to lending institutions. Get a business credit card, and use it for business expenses you know you won’t have trouble repaying. After several months of payments, you can ask to increase your credit limit. Keep your credit utilization down (under 30 percent is best) and stay timely with your payments, and you’ll start to see a boost in your credit score.
5. Start monitoring your score today.
Paying for a credit report once a year isn’t the only way to stay informed on the health of your business credit. Experian and Equifax will monitor your credit regularly for a fee and tip you off to any sudden drops in your credit. By monitoring your credit year-round, you can watch how your spending and borrowing affect your credit and plan for future financing.