When you receive a business loan, it is a prime opportunity to build excellent credit history. In this post, we will go over how you can use your business loan to improve your credit score. Raising your credit score by just a few points will allow you to afford lower rates for future loans and will ensure that your business is in better financial standing.
Submit Payments Early or On-Time
Many people forget to make their loan payments which can result in a poor credit score in the long run. It also affects your ability to receive funding because lenders do not like to see late or missed payments on your account. However, you can make it easy by setting up automatic payments. If you pay earlier than the due date on a regular basis, your score will improve. For example, Dun & Bradstreet gives perfect credit scores to those who pay early.
Keep Your Information Current
Unlike personal credit scores, each business credit bureau calculates your business’ credit score differently. For example, Dun & Bradstreet has a business profile that you can update with some basic information like years of operation, number of employees, and financial statement.
It is important that you maintain your information across all of the major credit bureaus since you cannot predict which bureau feature lenders will check with. The more complete your profile is, the better you look to potential lenders.
Borrow from Lenders Reporting to Credit Bureaus
Make sure that your lender reports to a business credit bureau before you borrow. As mentioned above, making timely payments is a great way to boost your credit score faster. If your lender does not see your report you might never see the results from your good habits. Ask your lender if they report to a credit bureau so that you are aware of this before applying.
Monitor Your Credit Report and Fix Any Errors
Although you need to pay to check your business’s credit score, it is recommended that you do so at least once or twice a year. You should be aware of what your credit score is when you approach a lender. After you make your timely payments, make sure that your score is going up.
Your business’s report includes everything filed under your business’s name such as bankruptcies, judgements, and tax liens. Ensure that any of these are removed from your report as soon as it is possible. Fix any errors as soon as you can because it usually takes a month or so to get it fixed so start early.
Consolidate Any Other Loans
If you have any outstanding debt, consolidate what you can. This lowers the overall payment slightly and helps boost your credit score because you are paying one loan each month instead of several.
Do not let your dispute go to collections. Pay it under protest and go to small claims court. If you are sued, it can affect your credit score in a negative way. In addition, if you want to close a credit card account think about it twice. It can hurt your score if you close it so consider waiting a little longer and leave it open so that it doesn’t affect the score.
Do Business with Those Extending Trade Credit
Most third-party vendors from who you buy supplies, ingredients, and other materials extend trade credit to their customers. With trade credit, you can pay several days or weeks after getting the inventory.
Ask your supplier to report your payments to a business credit bureau. To be listed on Dun & Bradstreet’s Paydex platform, you’ll need at least three trade lines. An easy way to start is to ask your smaller vendors to report to the bureaus, or you can submit this information to the business credit bureaus yourself.
The Bottom Line
It is not easy to improve your credit score but it can be done with the tips mentioned above. If you have poor credit, be sure to start improving today.