How to Improve My Small Business Credit

Small business credit scores are determined in a similar way to personal credit ratings. Separate business credit reporting agencies collect information on payments you make to vendors, your business credit card debt and various other accounts you hold. Similar to how a personal credit report is based on your name, address and social security number, a business credit report is produced using your business name, address and your Employer Identification Number (or EIN), which can be obtained for free from the IRS.

Follow these simple steps to improve your small business credit (which will in turn make lenders more willing to extend credit to you):

Get your business credit report. Either use a monitoring system that gives you regular updates on your small business credit rating or pull your report often enough to note important changes. Obtaining your small business credit report does not have an influence on your credit rating the way that pulling your personal credit report does. You can get your business credit report from Experian or another verified agency.

Check your report for accuracy. Watch for accounts that are not yours, incorrect balance information and other mistakes a bank or vendor may have made. Make sure that any money you are paying in a timely manner to lenders and suppliers shows up on your business credit report.

Make payments on time. The most direct way to improve your small business credit rating is to pay other companies on time. You should meet or exceed whatever terms your vendors set for payments; these transactions have the largest impact on your business credit score.

Don't use a large percent of your available credit. Through credit lines and credit cards your business has a certain amount of available credit. The extent to which you use this credit to finance your daily operations is known as "debt financing". As a small business owner, you'll want to only use about 20 to 30 percent of the financing available to you. If you have a decent credit rating and are being offered another credit line, it may be in your best interest to take it and not use it, thus lowering the "used to available" ratio.

Source:
Experian: Improve Business Credit