The first step in improving your credit score is understanding what it means. Your credit score is calculated based on five categories: payment history, debt levels, length of credit history, types of credit used, and new credit.
A good credit score is of critical importance for small businesses relying on their financial reputation. Having a decent credit score gives you the financial flexibility to explore different options and gain the trust you need in the lending industry.
Small businesses can increase their chances of getting funding or a bank loan by improving their credit score. Here are some vital business tips that can help increase your credit score and brighten the prospects of getting the funding your business deserves. It would also help to consult a professional funding company like Fundwise in Atlanta, GA.
Pay Bills on Time
Paying bills on time is a simple yet effective method of improving business credit. Making timely and consistent payments strengthens your credit score. It improves your chances of a business loan. Try paying your bills on time, even if you’re paying the minimum amount.
How Does Having a Good Credit Score Help?
A small business with a good credit score will find it easy to get funding, as banks are more likely to lend money and offer loans. Credit scores of 700+ indicate excellent credit history, and businesses with higher scores may have an easier time getting low interest rates on loans or lines of credit.
Monitor Your Score
Monitoring your business credit report is necessary for effective credit score maintenance. You should make checking the score with the credit bureaus a routine practice and highlight information you consider doubtful or causes a significant drop in your rating. It is essential to address problems identified in the report and carry out proactive decision-making to avoid them in the future.
Warning Signs You Should Pay Attention to
How do you know if your company is in trouble? Well, for starters, a significant warning sign is a high debt to equity ratio. Things like not having enough cash flow and still paying off debts, mean that bankruptcy might be looming over your head (unless some drastic changes happen relatively quickly). “Day’s sales outstanding” can help predict potential issues with the business.
Lower the Credit Usage
Lowering the credit utilization rate will help a small business get approved for loans. A company should aim to keep this rate below 30%. Use credit cards with a low interest rate (i.e., one that doesn’t charge an annual fee) instead of multiple ones at high rates. Ensure the total balances across three or more card accounts are less than 20% of your limit. Consider using balance transfer offers when opening new accounts if you are looking to consolidate debt.
Fundwise helps small businesses in Atlanta, Georgia get the funding they need by giving solid advice regarding their credit score. We make small business funding possible by helping you increase and improve your credit score, making you eligible for financial support from financial institutions such as banks. Apply now and get in touch with our professionals.