Getting funds for businesses can be quite tough even under the best circumstances. A lot of business applications for loans get disapproved on a daily basis.
To get successfully approved for funds good credit is required, and that brings about an additional task for all business owners. If you’re one of those business owners in need of funds, you’ve got to be on the lookout to avoid ruining your credit. These are 4 common ways you might be ruining your business credit.
1. Ignoring Your Business Credit Report
There are 3 major commercial credit bureaus- Dun & Bradstreet, Equifax, and Experian. Once you get your report ensure to check and confirm the listed accounts are yours, the correct age of your business and the information for each is accurate and up-to-date. Errors in any of these areas can make a lender disapprove your application.
Incase you find an error in your credit report, make contact with the credit bureau and follow the instructions and get it corrected. You can sign up for a free credit monitoring service that reports changes to your file in order to avoid any more problems and if any fix them early enough before they get out of hand.
2. Not Establishing Business Credit
Using your personal money to fund your business can be harmful to your business credit. You will need to open a business checking account, ensure you make use of that account for all your business expenses. This will be beneficial to you in getting your Employee Identification Number and also it will make bookkeeping a lot easier.
Afterwards, apply for a business card if you do not have one already and ensure you use it for your business expenses.
3. Using Too Much Credit
Credit utilization is one of the factors used in determining your credit score, it is measured with your average daily balance. Utilizing too much credit can be as bad as not using enough even if your pay your bills as at when due.
The other problem with using too much credit begins from the applications themselves. Anytime you submit an application, the creditor makes an inquiry on your credit. This eventually reduces your score slightly in the short term, and too many inquiries can give the impression that you’re cash-strapped. It’s best to submit all of your credit applications at the same time when you’re on the lookout for the best rates and terms.
4. Paying Bills Late
When you make a late payment with personal credit it doesn’t show up on your credit report unless you pay 30 days late, but this is different for business credit. If you default in any way, you will be reported to the credit bureaus.
If you’d miss a payment, contact your creditor to let them know you’ll be late and ask that they do not report the overdue payment to the credit bureau. If you have maintained a good record of on-time payments and can negotiate a new due date, hopefully, they’ll let you slide.