5 Expert Tips to Improve Your Small Business Credit Score

Saroj Shah
January 25, 2023

Credit agencies assess the creditworthiness of business organisations and assign scores to help lenders make better decisions. These credit scores capture multiple aspects of an organisation’s credit history: repayment records, the debt amount, types of credit instruments, etc. When business owners apply for business loans, lenders evaluate credit scores to determine their eligibility and credit worthiness. If you/your firm has a high credit score, you are more likely to get favourable loan terms and options. On the other hand, a lower credit score can lead you to shell out more interest while repaying your loan. You can often get bad credit business loans. However, it is better to boost your creditworthiness to land better deals. Let’s break down the expert tips to improve your small business credit score!


Why Is Your Credit Score Low?

Different credit agencies have varying criteria to ascertain your creditworthiness. But in general, one’s  credit score tends to be low when the following happens:

  • The firm makes a delayed payment.
  • The organisation has recurrent records of defaulting on loan repayments.
  • The business files for bankruptcy.
  • The business applies for several loans and credit cards within a short span.

The above scenarios indicate that the organisation is struggling with financial issues. As a result, lenders are wary of lending money to them. They charge higher interest or set stricter terms to cover the risks associated with bad credit loans.


Tips To Boost Your Business Credit Score

When you apply for a small business loan, lenders evaluate the firm’s financial records and credit history. These expert tips can help you make a positive impression and enhance your credit score!

1. Separate Personal and Business Loans: Many small business owners use their personal credit cards for incurring business expenses in the early days. However, this practice can prevent your business from leveraging the benefits of a stable credit history. A longer credit history for your business can help the firm achieve higher credit scores.

2. Ensure Timely Repayments: Paying loan instalments on time can go a long way toward improving your business credit score! Repayment records can influence the final score. Hence, you must remain consistent in making timely payments. You can set reminders or establish direct debit systems to ensure you do not miss any payments.

3. Cross-check the Accuracy of Your Business Credit Files: An organisation’s credit file includes details like name, address, credit enquiries, total debt, and similar details. Even small, innocuous mistakes in these records can prove costly in the long term when lenders evaluate your details. Hence, you should regularly cross-check your credit files and apply for corrections wherever required.

4. Minimise Credit Inquiries: While a healthy debt level is good, applying for too many loans can spell trouble. When you apply for business loans, your credit file reflects the same. You should minimise the number of credit enquiries to maintain a higher credit score.

5. Establish Credit Lines with Vendors: If you have regular suppliers, you can establish credit lines with them. Regular repayments to these stakeholders can help you bolster your credit score without racking up unhealthy debt.

If you want more guidance and help applying for business loans, contact the team at Broc Finance today!

Saroj Shah

Saroj is the Head of Lending at Broc Finance. He comes with 13+ years of experience in small business lending and has a knack of structuring complex deals and get the best outcome for his customers.