A terrible consumer credit score can be a massive roadblock. You’ll have trouble renting an apartment, acquiring a mortgage, buying a car and making other significant financial decisions that require credit checks. The same can be said for a bad business credit score. A low number in a report could dramatically limit your funding opportunities in the future and put your operation in jeopardy.
What Is Different About Business Credit?
The main difference between a business credit score and a consumer credit score is that it only deals with financial matters relating to your business. It won’t touch on your personal spending habits or previous red flags.
Another distinction between business credit and consumer credit is the scoring system. A consumer credit report measures your financial history through a FICO score between 300 to 850, with 300 being the worst and 850 being the best possible rating. A business report gives you a score between 0 and 100, with 0 being the worst and 100 being the best possible rating.
What Can You Do with a Low Score?
The first thing that you can do is stay calm. There’s still hope for the future. You can take certain measures to build up the numbers and give your business a better financial reputation.
Check for Mistakes
If you spot any errors in the report, contact the agency and then have them remedy the situation. A simple adjustment could improve the overall score.
Seek Professional Help
When in doubt, seek out the experts. Go to licensed debt professionals to sign up for their comprehensive credit counselling services so that you can improve your spending habits and your monthly budgeting skills. They will go over your personal finances to find your blind-spots and teach you effective money management tools and spending strategies that will revamp your report over time.
Separate Business and Pleasure
While you run the business, you want to treat it as a separate entity from your personal life — and your personal credit. One of the reasons why you should never co-mingle personal and business expenses is that it could negatively impact your business’s credit history and sabotage your future financial plans. Another reason is that it can make bookkeeping a huge ordeal.
Pay Your Bills
Being late for one bill is a small mistake that you can get away with. But every month? No, that will really hurt your score.
You need to pay your bills on time from now on. You can automate your bill payments to guarantee that they’re completed by the due date — even if you forget about the day, your account won’t.
Pull Back on Spending
If you’re always close to your credit limit, it’s time to pull back on your card use. Only swipe the card for the essentials. Use other accounts for groceries, clothes shopping and other day-to-day expenses.
Taking care of your business score may not feel important right now, but it’s a good plan for the future. You’ll eventually need to apply for funding, take out insurance or expand to another location, which means you’ll have to show off a report. In those moments, you’re going to want to be as close to 100 as possible.
