6 Tips To Build A Strong Business Credit Profile

Building a strong business credit profile is your first step to gaining access to the right financing for your business. Here are six tips that will help you scale your credit score.

Building a good credit score for your business is crucial for possible future financing. Even if you start your business with your own money, there is no doubt that you will need a small business loan to take it to the next level. Therefore, learning how to build a strong business credit profile must remain at the top of your priority list if your business must thrive on external financing. 

A strong credit profile not only opens doors to possible loan facilities for your business, but lucrative contracts and deals sometimes require your company to have exceptional credit scores. Nick Wilson, CEO of AdvanceSOS, recently shared six important tips that can help you boost your business credit profile. These tips are relevant whether or not your business has a credit history. 

AdvanceSOS is a loan aggregator founded in 2019 by Nick Wilson, an experienced loan officer. Its easy application helps borrowers reach a huge network of direct lenders to get a 500 dollar loan at AdvanceSOS on the same day or within 24 hours. 

Differentiating Between Personal Credit Profiles And Business Credit Profiles

Your credit profile consists of the credit history you have formulated over time using your social security number. They may include a chain of secured and unsecured loans such as mortgages, car loans, insurance, payday loans, credit cards, and so on. 

Key components such as your payment history, duration of credit, unsettled debts, credit mix, and new loans obtained are evaluated to form your credit profile. Also, your ability to pay back these cash advances when due improves or depreciates your credit score and may affect your ability to access more credit facilities. 

On the other hand, your business credit profile consists of those debt financing facilities advanced to your business and not to you as an individual. However, lenders may run a check on your credit profile when advancing business loans to small businesses. 

Unlike the chain of personal loan facilities that form your credit profile, activities such as payment history of your business, financial stress score, utilised credit ratio, and other relevant data are evaluated to form your business credit profile.

Essential Tips To Build A Sustainable Business Profile 

1. Register Your Business 

If your company has no credit history and you want to start off on the right foot, you should register your company. Business registration commences your business credit profile journey. Also, after registration, you must obtain your federal tax identification number. 

This is sometimes referred to as the employer’s identification number, which is quite similar to the social security number associated with an individual. You have commenced the long but interesting journey of building your business credit profile with all of these done. 

2. Stay Updated With The Credit Bureaus

You must constantly update your business information and credit history with the three important credit bureaus for businesses. Potential lenders examine the information provided to these bureaus to determine your creditworthiness.

These three credit bureaus have their own separate ways of calculating your credit score. However, the scores formulated by them determine whether your business credit profile is strong or not. It is also a good idea to keep your data up-to-date with all three bureaus. None should be your favourite because potential lenders can consult any or all of these credit bureaus.

3. Utilise The Power Of Tradelines

The Dun & Bradstreet Paydex score requires that you have at least three settled trade lines, and the greater the number of settled trade lines you have, the better your score. Therefore, you can make this work in your favour by establishing an account-payable relationship with your vendor or suppliers if that is your line of trade.

This way, you take up their trade credit and settle the credit promptly and ask that your vendor report your payment history with them to the credit bureaus. This will boost your credit score tremendously. You can also approach the credit bureau yourself by lodging the payment history as a trade reference on your account.

4. Put Your Vendors To Good Use

This is a supporting tip to the third tip above. The logic behind using tradelines is to establish a narrative of creditworthiness with the credit bureaus. Therefore, you need to conduct business with suppliers and vendors that report to a credit bureau. The whole essence is not to be dodgy but as transparent as possible, and you must have this transparency reported.

It then becomes an important business question you need to ask every supplier or vendor, whether they will report your prompt payments before taking up their credit or loans. Already, banks and other financial institutions that extend loan facilities to businesses report your credit history to the credit bureau, which is why prompt settlement of debt automatically increases your credit score.

4. Factor In Credit Utilisation

The use of credit cards and lines of credit to boost your business isn’t novel. However, what is important is that you must avoid maxing out these credit cards. You must learn how to make the most of your credit card. Essentially, never exceed your limit, and when you do, pay it back promptly. When you have credit limits, do not exceed 30% of your credit limit.

Also, do not use your credit card for business purposes. You must avoid letting your credit profile affect your business. Open a business credit card instead and ensure that the credit card company reports your history to the credit bureaus.

5. Monitor Your Credit

You may not always have your credit details at the back of your hand. It is important that you consistently monitor your business credit to ensure you have the right credit profile that attracts lenders and yields lower interest rate opportunities when seeking credit or loan facilities. Furthermore, monitoring your business credit reveals any damaging issues or fraud that may cause a dip in your credit score.

About the Author: Amanda Girard leads the financial copywriting team at AdvanceSOS. Her invaluable input and expertise translate into articles posted throughout our website and other notorious channels. Since our founding in 2019, she has written the most comprehensive yet exciting pieces for our company.

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