What’s the Best Way to Improve Credit Score for You and Your Business?

If you are thinking of starting a business, you are likely thinking about funding.  Can you afford to start a business?  If you have a good credit score you probably aren’t worried. If your credit score isn’t great, you may be wondering “What’s the best way to improve credit score in time to start a business?”  

Best Way to Improve Credit Score, Both Personal and Business

The thing is, that’s the wrong question. You need to be asking yourself “What’s the best way to improve credit score for myself and my business?”  Whether your business is brand new or fully established, it needs a strong business credit score to thrive. 

Many business owners do not even know that their business can have a credit score.  They assume everything rests on their personal credit.  Others know their business can have credit all it’s own, but do not truly understand how a business gets its own credit score. That knowledge is key to learning the best way to raise your credit score and how to build a strong business credit score.

Keep your business protected with our professional business credit monitoring.

Personal Credit Score vs. Business Credit Score: What You Need to Know

Your business credit profile is the overall picture of the creditworthiness of your business. Lenders look at it to determine whether or not they want to lend to you.

To better understand the best way to raise credit score for your business and how it is different from your personal credit score, you need  to understand some of the differences between business credit profiles and personal credit profiles.  There are many, but these specifically seem to cause a lot of misunderstanding and confusion among borrowers when they get a funding denial. 

How You Establish Each Type of Credit Profile

The biggest and probably most misunderstood difference is in how you establish the two profiles with their accompanying scores. Pretty much everyone knows that with your first debt, usually a credit card, you begin building your personal credit score.  If you handle your credit responsibly, you will have a good score. If you do not, your score will be bad.  

You do not have to do anything to open a credit profile for yourself.  As you pay your debt, the creditor reports your payments, or lack thereof, and your score builds from there.  Such is not the case with your business credit profile. 

You have to intentionally set up your business in a way to establish your business credit profile.  This means fully separating it from yourself as the owner by having separate contact information, an EIN, and D-U-N-S number, incorporating, and opening a separate bank account.  In fact, this is the first best way to improve your business credit score.  Before these things are done your business will have no credit profile or credit score of its own. 

Late Payments

Both business and personal credit reports are affected greatly by late payments. Yet, business credit scores are affected faster and more profoundly. Late payments are not reported to personal credit reports typically until they are 30 days past due. Late payments on business credit accounts are reported if only one day late.

Inquiries

Hard credit checks on your personal credit will lower your credit score. However, business credit reports are different. A credit check on your business credit profile does not affect your business credit score. 

Data Reported

In addition to late payments being reported much more quickly, accounts on your business credit profile are listed by industry.  In contrast, personal credit lists the name of the company that issues the credit.

Also, personal credit reports show the exact amounts of accounts, while business credit reports show rounded amounts. How long data stays on a personal credit report varies, but typically it’s the life of the file. Information stays on business credit reports an average of 3 years.

Keep your business protected with our professional business credit monitoring.

Also, with personal credit accounts,  almost every account reports to the credit reporting agencies. In contrast, only about 7% of business credit accounts report to business credit reporting agencies. This is why you have to intentionally seek accounts that will report to business credit reporting agencies (CRAs), and that is only one of many reasons working with a business credit expert is the way to go.  

One last thing to note about business credit versus personal credit is this. While your business credit profile is totally separate from your personal credit profile and does not affect in any way, the reverse is not true.  Your personal credit information can affect your business credit profile, and in some cases, even your business credit score. 

Best Way to Improve Credit Score: Personal 

Most people know many ways to do this, but what is the best way to improve credit score on your personal credit profile?  Frankly, it’s to pay your bills consistently on-time.  That said, sometimes that isn’t the problem.  Furthermore, sometimes you need to make other improvements while you work on paying on time. 

Personal Credit Score Monitoring

This is easy and free. You can get a free copy of your credit report annually.  The first thing you need to do is look over it for mistakes. If you find any, contact the CRA in writing. Send with your letter copies any documents you have to support your case. This may be receipts, bank statements, anything that proves that what you are saying is a mistake is indeed a mistake. 

After that, look closely for what else could be causing issues.  Is too much available credit being used? Are there too many late payments? The best way to fix this is take a long, hard look at your budget.  Cut wherever you can to start making more than the minimum payments. 

A good strategy is to put all available extra cash on the highest interest debt.  Then, when that is paid off, put that entire amount, extra plus the minimum, on the next highest interest debt, and so on.  This is called the snowball method, and it can help you raise your credit score significantly if you stick with it. 

After that, there are many free apps to help you track your personal credit score throughout the year. This is the best way to get credit score information on a regular basis. Typically, you can get a snapshot of what your credit looks like once a month with these, and if you pay a fee you can see it in real time. This can let you see if your efforts are working, and show you if something is amiss. 

Best Way to Improve Credit Score: Business

Understanding how your business credit score is different from your personal credit score helps a lot. For example, now that you know that a business credit account can report a late payment even one day late, you can plan accordingly.  

Furthermore, knowing that not all business accounts report lets you know that you need to intentionally look for those that will report to raise your score.  

There are a few ways to do this. First, talk to any vendors you already have a relationship with.  Ask them to report your payments to the business CRAs.  They don’t have to, but they may.  It can only help you. 

Next, talk to utility, phone, and internet providers. You pay them monthly already.  Ask them to report those payments.  Again, they do not have to. Still, if they agree, it can only help you. 

After that, actively seek out accounts that report. The problem is, most vendors do not make it publicly known whether or not they report. This is just one of the many ways a business credit expert can be helpful. They have inside information and relationships with vendors to help you get this information and more.

Keep your business protected with our professional business credit monitoring.

Business Credit Score Monitoring

This is a whole other ballgame. First, business credit score monitoring is never free.  You may be able to get a peek as a one time free trial promotion, but for the most part you have to pay to see what is on your business credit profile.  One exception is, if you get a loan denial because of what a lender sees on your business credit report. They have to disclose that, and you can get a free copy of your business credit report as a result. 

While all the major business CRAs offer credit monitoring services, they are pricey. Credit Suite offers business credit monitoring for a fraction of the price. 

Follow the same steps as you would with your personal credit profile. If you see a mistake, contest it.  Each of the bureaus has directions on how to do so on their website. 

There is More Than One Best Way to Improve Credit Score, and More Than One Credit Score to Improve

All the best ways to get your credit score up involve one thing, knowledge. First, you have to know how to see what is one your credit report.  Then, you have to know what to look for so you can know what the problems are. After that, you can fix them. One thing remains true however.  The hands down best way to improve credit score, whether personal or business, is to pay your debt on time.  If you need help on the business side, Credit Suite has you covered. Talk with one of our qualified business credit experts today!

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