As a small business owner, you have so much on your plate that it can be difficult to focus on your business credit report. Unlike your sales numbers or your expenses, it’s not something that comes up on a daily basis.
On the other hand, when the time does come to care about your business credit report—like when you’re applying for a loan, or want to qualify for an elite business credit card—you don’t want to be scrambling to improve your score at the last minute. That’s why credit repair services (some of which are scams) exist.
But you don’t need to pay someone to improve your business credit. In fact, boosting your business credit score doesn’t take that much work at all. Many of the things you do as a responsible business owner will improve your score. It can be helpful to know what those things are, so you can continue doing them, or do them better.
Here are six easy things you can do as a business owner to boost your credit score. Keep them in mind as you run your business—it’ll pay off in the long run.
1. Continue to exist
Here’s a good one: Stay in business! One of the most important aspects of credit history, personal or business, is the length of that history. The longer your business stays afloat, the better your business credit score. Lenders also consider time in business as one of the most important factors when deciding whether to approve you for a loan.
It’s important to note in order to start building a business credit score, you need to establish a business credit report. Sole proprietors who freelance, use their personal credit card for expenses, and otherwise don’t establish themselves with a business credit bureau may not begin building business credit.
Here are a few steps you can take to establish business credit:
Once you establish business credit, it’s up to you to keep the lights on, improving your score further.
2. Pay off any, or all, of your credit card debt
Your credit utilization ratio is the amount of credit you’ve used relative to the amount of credit available to you—and it’s a factor in your business credit score.
If you have a couple of business credit cards and a business line of credit, you may have hundreds of thousands of dollars of credit at your disposal.
And if you’re currently using almost all of that credit? That’s a sign to credit bureaus—not to mention lenders—that your business is carrying a lot of debt, and may not be a good candidate to receive even more credit.
Paying down some of your credit card debt (if not all of it) and not carrying a balance over from month to month shows that you aren’t reliant on your credit to keep your business moving—and will usually result in a score bump. For the record, a utilization ratio of about 25% or less keeps credit bureaus happy.
3. Open another line of credit
As we’ve discussed, one way to improve your credit utilization ratio is to pay off your debt. The other is to increase the amount of credit available to you.