To secure various types of financing or credit accounts with lenders and suppliers for your business, you need to establish business credit and maintain a good score. Business credit scores don’t have the same scale as personal credit scores, and usually range from 0 to 100; the primary outlier is the FICO Small Business Scoring Service (SBSS) score, which ranges from 0 to 300. The higher your score, the better. The general advice is that you should aim to have a score over 80, or over 160 on the FICO SBSS scale.
So, if your number has dropped over the years, you may be wondering how to raise your business credit score—especially if you hope to get financing or new credit accounts in the near future. Here are the basic reliable ways of doing so.
Tips to Raise Your Business Credit Score
- Review your credit report carefully to ensure that everything on it is accurate. You’ll have to purchase the report from one of the three major business credit reporting bureaus: Dun & Bradstreet, Equifax, or Experian. Ideally, though, review all three, as they can contain different information. The prices range from around $40 to $100.
- Dispute any errors you find on your report. In particular, mistaken reports of accounts in collections or late/missed payments unfairly lower your business credit score. You’ll have to do it with each credit-reporting agency individually. This can be done on their websites; simply follow their instructions for filing a dispute.
- Pay all your bills in their entirety on time. Having a record of timely payments is the most significant factor in your business credit report. Therefore, consistently paying on time is the most effective way to maintain a good score and to raise your business credit score over time. Setting up automatic bill payments can help.
- Decrease your ratio of credit used to total credit available. This is the other most significant factor in your score, along with your payment record. Ideally, don’t use more than 15% of your total available credit. There are several ways to decrease the ratio of credit used: pay down debt on business credit cards, lines of credit, loans, etc.; reduce your spending on credit; request increases in your credit lines (but keep in mind this will trigger hard inquiries that temporarily have a small negative effect on your credit score, so do so minimally and only if confident you can get an increase); or open new credit accounts (but keep in mind this lowers the average age of your credit accounts history, which also has a negative effect on your score—so, consider whether your score is more negatively affected by the age of your credit history or your ratio of credit used).
- Open different types of credit accounts. Having a variety of credit lines and loans is good for your business credit score.
- Establish credit accounts with suppliers. If they report your payments, this boosts your positive record of timely payments.
- Pay for deletion of negative accounts. Accounts in collection have a significant negative effect on your business credit score. However, simply paying them off does not raise your score. Even paid off, they still hurt your score as long as they appear on your credit report. So, only pay them off if the account holder agrees—in writing—to remove the account from your report. Otherwise, the fresh activity of making a payment on the account will actually extend how long it remains on your report, decreasing your score.
- Set up payment plans to prevent bills from going to collections. If you have bills you can’t pay off, it’s important to prevent them from going to collections and appearing as negative accounts on your business credit report. Contact whomever you owe and work out a viable solution to pay off your debt.
- Don’t close established credit accounts. It may be tempting to close business credit cards or other lines of credit you’re not using, but this can lower your credit score, particularly if the account is older than your average credit account age. Having multiple accounts that have been open for a while raises your business credit score, as does having the available credit reducing your ratio of credit used.
