Almost everything runs off your credit score these days, and your business credit score will do many of the same things for your company. Some of the factors that credit bureaus use to determine business scores are the same as those used for personal scores and some will be different. Knowing what those factors are can mean the difference between having the credit you need for new projects and being denied. Each credit bureau uses different criteria to determine your credit score, but there are two main things that you can do to improve or build your credit, make your payments on time and don’t overextend yourself.
Make Payments on Time
Business credit, like personal credit, takes a look at your history and gives you a score based on several different criteria in the hopes of predicting future trends. One of the biggest things that they look at is your payment history. This can give creditors and business partners an idea of how good you have been about paying debts in the past and so how well you will make payments in the future.
By making your payments on time, and keeping your lines of revolving credit low, you can show that you are reliable with money and with sticking to the terms of your loans. In many cases, having less than thirty percent balance on your lines of credit, particularly revolving credit, can do wonders for your score.
Don’t Overextend
Probably the biggest factor of business credit is whether or not you are overextended in terms of loans, personnel and other expenses. The more thinly your finances are spread, the more likely your company is to fold in the next year and that is a big factor in your business credit score. If you are currently overextended, then finding a way to pay down those lines of credit and reduce other expenses can help your score. It may take you longer to get to your ultimate business goals, but it makes it easier to actually get there without burning out. For instance, you might want to wait to take on larger projects, look into alternative financing to pay off some of your lines of credit or even reduce your workforce.
Business credit score calculation is generally more complicated than that of personal credit scores because all aspects of the business needs to be taken into account including the amount of overhead in employees, equipment and utilities. The best ways to improve your credit score, however, remain largely the same between business and personal. Namely, make your payments on time and don’t overextend yourself.