America is the land of opportunity for many people who want to own a small, independent business. If you are in this community, you would benefit to boost the commercial credit score of your business.
The old adage goes: Small business is the cornerstone of the American economy. If this is true, shouldn’t the financial industry in America do more to support and encourage small business development? In a time when it might seem like big box stores are edging out local competition and profit is more than purpose, though, there are many financial tools already in place to help you improve the your commercial credit score.
According to Adam Fingersh, senior VP of business information at Experian, it is important to rely on a commercial credit score in order to flourish your business. Having a strong commercial credit score will help you to separate the daily needs from your business with the changing stresses of your personal or family finances. To put this into perspective he says:
If something negative happens on the personal side of your life – a loan delinquency or a foreclosure, for example – it doesn’t negatively affect your ability to get funding for your business or vice versa.
Indeed, your business – your livelihood – shouldn’t suffer simply because you have to choose between your mortgage payment and your car payment for one month.
To get a high commercial credit score, follow these guidelines:
First of all, you should remember that consumer credit scores and commercial scores operate on different scales. Your commercial credit score follows a percentage scale (from 0 to 100). If your commercial credit score is 80, for example, it means that your financial risk is better than 80 percent of other businesses. Founder and CEO of Biz2Credit, Rohit Arora says:
The score takes into account financial and nonfinancial transactions and looks at other businesses in your industry and geographical area.
Secondly, remember to use your business’ Tax Identification Number (instead of your personal Social Security Number) to file your paperwork and process your taxes. This keeps the two records separate. You can use this number to sign up for utilities or a phone line, etc, when you want your business to benefit from paying your bills on time.
Third, and speaking of paying bills on time, always remember to pay your bills on time. It seems so simple, but it is also easily overlooked. Delinquent payments can immediately affect your credit score, but regular payments must be consistent over a long period of time before you really get to benefit from them.
Fourth, and somewhat in reiteration, keep in mind that credit scores improve slowly over time. This is particularly true of new credit and credit in repair. If your file is somewhat thin, do not just dive into more credit to try to boost the score quickly. Whether you have thin file or some credit mistakes, the best fix is to be responsible and wait it out.
Fifth, pay attention to payment details. Fingersh lists a great example of this:
Maybe your business is using an automated system that pays your utility bill five days past due every month because the payment cycle is set up incorrectly.
This could cost you a lot in fees over the course of a year – or even a lien or a judgment!
Sixth – and this goes for your personal credit score too – check for errors. Go through your report with a fine toothed comb and make sure all of your information is accurate and correct. Similarly, make sure that everything you need to report is in your report. Sometimes simply including one more credit account can improve your score.