It goes without saying that a good credit score is crucial for small business owners. A good credit score will put you in a position to apply for a loan to fund the growth of your business, lease or buy equipment, or even rent space. For those who may have less than stellar credit don’t worry, below is a guide on ways in which you can improve your credit.
Check your credit reports regularly
This one seems like a no-brainer but worth mentioning. It’s important to check your credit regularly. To do this you can use apps like Credit Karma to pull your credit reports from bureaus like Equifax and TransUnion. While you’re looking over your credit report be sure to check for any suspicious activity that may hurt your score and report them right away.
Pay your bills on time
One of the biggest things that will hurt your credit score is late payments. It’s important to pay your bills on time as much as possible. We understand that times get tough but when that happens, reach out to your creditor. Explain your circumstances and see if they will allow you to explore other payment plans. Something towards your balance is better than nothing.
Manage your credit utilization
Credit utilization refers to the amount of credit you use on a regular basis compared to the maximum amount you have available. If you use too much in relation to your maximum credit, it could lower your score. A good way to avoid utilizing too much credit is to aim to keep your utilization below 30% each month. This will show creditors that you’re managing your credit effectively.
Diversify your credit mix
As the title says, it’s helpful to have different types of credit in your portfolio. This could be a mix of credit cards, loans, and lines of credit. It’s important to note that too many accounts can be detrimental to your score so be careful with how many accounts you have open at one time.
Build your credit history over time
Time is a great resource when building credit. As they say, Rome wasn’t built in a day, so give yourself time to build your credit. Small, positive steps taken each day, month, or year will help to improve your credit.
Credit is extremely important for business owners today. By following this simple guide you will be well on your way to a healthy credit score.
Written by: Erik Hibbard