If you own a small or medium-sized business, your personal credit report is vitally important. A great credit score can not only help you receive a loan but also improve the interest rate you pay on that loan. For a more in-depth overview of how your personal credit can affect your business, read our previous article, “Credit Check: Will My Personal Credit Affect My Business Loan?”
For a quick overview, keep reading. In this article, we’ll give you some practical tips to improve your credit score fast so you can reap the benefits and save money.
1. Keep Your Credit Utilization Low
Credit utilization is a measurement between two factors: current credit card debt and credit card limits. For example, a person with $500 in credit card debt with a $5,000 limit has a credit utilization rate of 10%, which is very low. A low credit utilization gives you flexibility in case unforeseen business expenses arise.
A good rule of thumb is to try and stay below a 25% utilization rate. To get your utilization that low, you may have to make multiple payments per month or ask the credit card company to increase your credit limits.
2. Make Payments on Time
Staying organized and paying your bills on time is extremely important when trying to improve your credit score. The later the payment, the bigger the negative effect on your credit score.
A late payment before the 30-day mark may cost you a few more dollars in late fees, but it won’t get reported on your credit score. Once you’re 30 days late, the late payment will show up on your credit report.
Being 30 days late is bad, but not getting current is worse. Getting current and staying current on all payments plays a big role in determining your overall credit score. To stay current on payments, consider setting up automatic payments or text reminders.
RELATED: Business Health: How Equipment Financing Can Help Your Cash Flow
3. Think Twice Before Closing Old Accounts
Are you thinking about canceling an old credit card you never use? You may want to think again. Having a good payment history can help in your credit score, and that old credit card may be serving this purpose. If you close the old card, the payment history will drop off your credit report, and your score may go down as a result. Not only that, but the old card may be adding to your overall credit availability and lowering your credit utilization (see tip #1).
4. Have a Credit Mix
There are many different types of credit you can hold. Some of the most common types are mortgages, credit cards, and auto loans. Other examples include charge cards to retail stores, home equity lines, and recreational loans.
Having a mix of different credit types can be as important as paying your bills on time. The ability to maintain a credit mix and pay on time shows your lender you can manage multiple credit lines, which tells the lender you’re a responsible borrower who knows how to handle credit.
5. Dispute Errors
Errors happen, so it’s critical to check your credit score regularly. If you do find an error on your credit report, report it right away. Credit reporting companies don’t require fees to file a dispute, so correcting the error should cost you nothing (except time).
You can dispute the inaccurate information with either the credit bureau (TransUnion, Experian, Equifax) that issued the report containing mistake or the company that reported the incorrect information to the bureau. If the information is truly inaccurate, you should be able to get it pulled from your credit report and fix any damage to your credit score.
Partner With Team Financial Group and Get Fast, Flexible Financing Today
At Team Financial Group, we offer flexible payment terms tailored to meet your business needs. Even if you have a low credit score, don’t get discouraged — our commercial financing experts are here to help, and we’ve been able to provide financing for businesses with all types of unique circumstances. Our application process is easy and won’t affect your credit score, so apply today to get started.
If you have any questions about the financing application process or which financing option is right for your business, fill out our online contact form or call us at 616-735-2393. We’d love to chat with you about your options.
The content provided here is for informational purposes only. For financial advice, please contact our commercial financing experts.