How to Fix Your Business Credit Score
Establishing your business credit score can involve a variety of different steps according to The Really Useful Information Company (TRUiC) – which provides tailor-made guides for virtually anything “business” related.
Below, we’ll explore the three most important steps you need to take if you’re looking to improve your credit score in a simple and straightforward way.
Step 1: Make sure you set up your business correctly
Here is the first and one of the most important steps you can take to improve your business credit rating. According to TRUiC, it’s about making sure you’ve set up your business in compliance with all applicable legal requirements.
Use the right business structure
Choosing the right business structure can go a long way in ensuring that your business exudes a certain element of credibility and reliability. According to TRUiC, your best option here is to incorporate your business by registering it as a limited liability company or as a corporation.
The credit rating of the business cannot be improved if you are working as a sole proprietorship because your personal and business finances are not legally distinguished as two separate entities.
Get an Employer Identification Number (EIN)
After you have successfully registered your business (taking into account your most favorable business entity structure), you will need to create an Employer Identification Number (called EIN).
It should be noted that your business will need to meet a plethora of legal prerequisites to be eligible for an EIN, including to be incorporated.
Set up a corporate bank account
One of the most fundamental points raised in TRUiC’s guide to building business credit was creating a business bank account. This is because having a business checking account will a) provide you with a plethora of financial benefits (like loans) and b) improve your financial organization by separating your personal and non-personal finances.
Get a business phone line
While this may seem less important when it comes to business credit, TRUiC has emphasized its importance to how lenders will view your business, and therefore how they decide whether or not to extend your business credit. .
Get a business website
Obtaining a business website can help you improve your business credit in the same way as obtaining a professional phone line. Overall, it will act as an active representation of your business image and also provide crucial information that lenders will rely on to verify your personal information and history.
Step 2: Establish a Business Credit History
This is a critical step which, in fact, can indirectly cripple various business owners. Indeed, to have good business credit, you will need to have sufficient time to build it.
Pay all bills and lines of credit on time
Paying all of your bills and lines of credit on time (or sooner, if financially feasible) is undoubtedly one of the easiest, easiest, and most efficient ways for you to establish and maintain a good business credit rating according to TRUiC.
In order to ensure that you never inadvertently miss a business payment, you should take steps to: a) organize reminders through your company’s calendar apps (such as through Google or Microsoft), and b) always prioritize your invoices by order of importance.
Set up Net-30 accounts
Net-30 accounts allow businesses to pay for any business product or service they need up to 30 days after purchase.
In addition to the obvious general cash-flow benefits that businesses can enjoy through a Net-30 account, properly repaying these payments on time can go a long way toward a successful business credit history as these suppliers report directly to the United States. credit bureaus.
Step 3: Know What To Avoid When Establishing Business Credit
Avoid predatory lenders
While these may seem harmless at first, TRUiC’s industry analysis found that in fact, these predatory lenders are becoming more and more ‘sneaky’, offering exorbitant loans coupled with very high daily interest rates. which, in pragmatic terms, allow them to be repaid on time. almost impossible.
Have outdated business information
Not updating your business information properly is one of the easiest and most negligent ways to hurt your business’s credit rating; this is because it can indirectly affect a plethora of important milestones mentioned above.
Above, we’ve outlined the most important steps business owners can take to properly “fix” their business credit score according to TRUiC’s team of experts.
If you’re still looking for a ‘guide’ in this area, take a look at TRUiC’s recent Obsidian Bear Funding review; this can be of particular interest to proactive small business owners with future expansion plans that will undoubtedly require external funding.