There are various times when a business needs some external financial help. Possibly, your sale gets affected by seasonal changes, you want to improve inventory but falling short of cash, or you are aiming for business expansion. These mentioned and other reasons compel business owners to look for fundings other than their generated revenue. But sometimes it becomes tough to access such financial assistance.
One of the reasons why business owners might not be able to clinch a deal is because of their bad credit score. With all the daily operations to look after, customers to handle, and other various projects to take care of, business owners sometimes forget to keep an eye on their credit scores. That is one of the biggest mistakes that analysts observe in business decline scenarios.
Your business credit score is one of the essential elements of your business, and you have to make sure that it is always in good condition. Eventually, when you need a loan, you can get it seamlessly without the hassle of loan application rejection. A poor credit score not only means loan rejection, but it also means that if you get the loan, then due to the bad credit score the interest rates will also be very high
So, if you don’t manage your credit score, you will be stuck with multiple uninvited issues. Now you may ask if there are ways to get out of this situation? Then the answer is yes. There are various considerable factors that you can take care of to ensure that your bad credit score gets transformed into good numbers.
Below, we have listed some of the steps that you can take to start improving your credit score.
ü ANALYZING YOUR CREDIT REPORTS
Knowing the problem is half of the solution, and it is right for this problem as well. The more informed you are, the better you will be able to navigate the future and improve your credit score. So, before you do anything else, make sure that you know your credit report. A credit report is your business’s complete credit history. It contains information about the loans that you took, the payments that you made, your credit management, and all the other details that lenders look at before approving your loan. There are options like business loans for bad credit, and you can opt for when you are stuck in such a situation, but that doesn’t mean that you don’t have to improve your credit score.
There are some companies that you can ask for your complete credit reports. You are allowed to have one free copy of your credit report from each of the three companies once a year. If you want more frequent updates, you will have to pay for them.
ü MITIGATE YOUR CREDIT REPORT ERRORS
Everyone has the right to allow only correct information on their credit reports. This is according to the Fair Credit Reporting Act. According to this act, if you find any discrepancies in your credit report, you can contact the credit bureau and have them make the necessary alterations. Once you have made the errors known, the company will have 30 days to act on it, and if the error is legitimate, they will remove it immediately. If you think that credit report errors are rare, then think again. There are a lot of reasons why these errors make their way into our business credit reports like human error or data that might get duplicated like birthdays, social security numbers, or others.
How does that help you? Let’s assume that you have made late payments in the past years. If by mistake, more late payments exist in your report, then it could harm your score. According to experts, late payments make up for 35% of your credit score. That is why you should always keep a strict watch on your report, and if there are any errors, report them immediately.
ü SETTLE YOUR DEBT ON TIME
It can be an apparent reason, and we all are well aware of it. According to experts, your payment history makes up 35% of your credit score. To keep the ball in your court, you need to ponder over this critical element of your credit report. More late payments will lead to an unfavorable report for the lending party. So, make sure that you make your payments on time, every time. Minimize all the expenses that you can so that you can make avoid trouble. If your report says that you paid off your mortgage before the allotted time, it will reflect your sound position in the business.
ü LIMIT CREDIT USAGE AND DEBT LEVELS
Another thing that you can do to improve your credit score is to make sure that you limit the usage of your credit. The more money you owe to banks and other non-traditional groups, the more it will affect your credit rating. That doesn’t mean that you cannot take out a loan when you need it. It only infers that you have to make sure that you are not indebted for a longer term. This method will increase your credit ratings.
ü AVOID NEW CREDIT APPLICATIONS
If you are already in a weak position in terms of debt, taking out a new loan or applying for one is not something that we will suggest. That is because whenever you apply for new credit, the lenders will do a complete check on you, and this will include your credit reports. The number of hard inquiries that you had undergone and the number of loans that you have taken out both reflect poorly on your credit score. If you have opened multiple accounts in a short period, it may tell the lender that you are in a financial rut and that lending you money is an obvious risk.
Improving your credit score is not something that happens overnight. You have to be patient and consistent. Keep analyzing your credit report, make sure that you are not spending more than required, hire a finance forecast professional to predict any possible crisis, prioritize indebted payments. Soon your credit score will gain satisfying numbers.