A good credit score is essential for any small business owner who might need to take out a loan or secure other forms of financing. But what happens if your business hits a rough patch and you start missing payments?
Your credit score will take a hit, making it difficult and expensive to borrow money in the future. Here are some tips for small business owners on how to keep their good credit scores intact.
Monitor your credit report regularly.
You’re legally entitled to one free copy of your credit report from each central credit bureau annually. Get yours now at AnnualCreditReport.com. Review your statements carefully to make sure there are no errors that could drag down your score. If you spot any inaccuracies, dispute them with the relevant bureau.
To dispute inaccuracies, you’ll need to provide evidence that the information is incorrect, and the bureau will investigate. If the information is found to be inaccurate, it will be removed from your credit report. However, this does not guarantee that the bureau will remove the information from other creditors’ reports.
Sometimes, the same inaccuracies will appear on more than one credit report. If this happens, you’ll need to dispute each item separately. This can be time-consuming and frustrating, so monitoring them to catch any errors early is essential.
Cancel liabilities that you don’t need
If you’ve taken on too much debt, consider canceling any liabilities that aren’t necessary. Make sure to check the terms and conditions of your contracts before doing so, as these may involve fees. These liabilities may include lines of credit, business credit cards, or other forms of financing.
It would be best if you also considered canceling your timeshare mortgage. Although this might not seem related to your business’s credit score, timeshare mortgages can drag down your score if you don’t pay them on time. They can also be expensive and difficult to get out of.
Organizing Your Business Credit Cards
If you have multiple business credit cards, it can be not easy to keep track of them all. This can lead to missed payments and delinquent accounts, hurting your credit score.
A good solution is to organize your business credit cards into a single spreadsheet. This will make it easy to keep track of due dates, balances, and other important information. You can also use the spreadsheet to create a payment schedule, so you never miss a payment again.
If you’re unsure where to start, there are many templates online that you can use for free. Just make sure to customize the template to fit your specific needs.
Pay all of your bills on time, every time.
This may seem obvious, but it’s worth repeating because late payments can significantly impact your credit score. Set up automatic payments for all your recurring bills, so you don’t have to worry about forgetting to pay them.
And if you do happen to miss a payment, be sure to contact the lender right away and explain the situation. They may be willing to work with you to make arrangements for catching up on the missed payment.
It’s also a good idea to keep your payments on a calendar to stay up-to-date and plan. You can use an online or paper calendar, but make sure it’s easy to access and update. This will help you avoid missed or late payments, which could negatively impact your credit score.
Keep your balances low.
The amount of debt you’re carrying has a significant impact on your credit score. So even if you’re paying all of your bills on time, you could still see your score suffer if you carry a lot of debt. Aim to keep your balances below 30% of your credit limit; anything above that starts to look risky to lenders. And if you can swing it, paying off your balances in full each month is even better for your score (and your wallet).
You can do a few things to keep your balances low and improve your credit score:
- One of the best ways is to make a budget and stick to it. This will help you stay aware of how much money you’re spending each month and ensure you’re not overspending.
- Another way is to use a credit card calculator to see how long it will take to pay off your balances. This can motivate you to pay off your debt faster and save on interest payments.
- You can also try a balance transfer credit card, which allows you to move your high-interest debt to a card with a lower interest rate. This can save you a lot of money in the long run.
These are some of the best ways to improve your business credit score. By following these tips and staying on top of your finances, you can raise your score in no time. Good luck!