Are you a small business owner looking to grow your business big in the next few years? Most people dream to have their own business and be self-employed. One of the avenues that you can take is to save up and turn your savings into investments, such as establishing your own business. To grow your business and make it more successful, building a good credit standing is a must.
Credit scores help you with prospective lenders to evaluate your business in terms of the risk that they can take when they offer you financing. It works just the same as personal loans, mortgages, credit cards, or car loans. Lenders review your business credit scores when you are inclined to avail of financing for your business.
A good credit score gives you a lot of advantages. It opens new doors for you to further improve your company. It may give you low-interest rates on business financing, business credit cards, supplier financing, and lines of credit. Moreover, if you get a good score on your business credit, it may lead to getting higher credit limits, and lower insurance premiums. Other lenders and suppliers may even come at your doorstep, giving you other funding options.
Still, it is not the case for all businesses because some don’t have good credit scores. It is mainly because of small mistakes committed while using your credit card. Some business owners max out their credit cards, which gives a negative impression to lenders. For others, there are petty mistakes. But when you don’t do anything to correct these mistakes, they can negatively affect your business credit score. Today, we will discuss ten petty mistakes that can give a negative impression on your business.
#1 Closing Old Credit Accounts
Do not dispose of or close your old credit cards. Doing so will lower your credit business score. Canceling your old credit card will automatically remove the good years of credit that had contributed to the current good score of your business. Keep them open and retain it as much as possible to avoid losing the good history of your payments and the good score that you currently have.
#2 Failing to Use Your Credit Card
Use it. Credit cards are meant to be used especially business credit cards. You need a credit history to build a credit score. At least, use it once a month to build up that credit record and show that you can pay every month.
#3 Opening Too Many New Credit Accounts
Opening too many accounts within a short timeframe will always lower your business credit scores. It will shorten your average account age negatively impacting on your older accounts. Avoid being a victim of every credit card company giving away amazing offers.
Many business owners prefer taking a long time when shopping for auto loans, business loans, mortgage, and many others. This way, we can get the best deals and save money. Still, buying for too long will be costly and give your business a bad impression. Plus, it lowers your credit score. To ensure that this won’t happen, you must take a shorter period if you are going to shop for the best rate.
#5 Too Many Expenses on Credit to Gain Rewards
Many of us end up being victims of using our credit card for cashback rewards, rack up miles, and so forth. Never use your card for non-intended purposes, or else your utilization ratio will jack-up. The higher the utilization ratio, the harder it affects your credit score. Never use your business credit card extravagantly chasing reward points unless you are sure that you will be able to offset the balance at the end of the month.
#6 Maxing Your Credit Cards
As a rule of thumb for every business owner or entrepreneur – is to never max out your credit card. Doing so automatically raise your credit utilization ratio. The higher the credit utilization ratio, the higher the risk of lowering your credit rating. Credit agencies expect you to use only a portion of your credit limit. On average, one should only utilize their cards up to 30% of your credit limit. Anything more than the prescribed percentage shows an indication by the banks that you are having some financial problems.
#7 Sharing Your Credit Card Number to Others
Some scammers can harm your credit score by doing unauthorized transactions without you knowing about it. These scenarios happen when unknown people call you and ask you for your credit card number. Never tell anyone about this information. Such matters can lead to identity theft or identity fraud. You should always condition your mind to ignore the message and never engage.
#8 Missing or Making Late Payments
The history of payment of your credit records is one of the key factors in determining your credit history. How early or late you are in paying or forfeit in paying your bills plays a very critical part in checking your business credit. Every time that you fail to pay on time, your score hits a new low. Every single payment missed on its due date can deny you a good credit rating and leave you in the fair credit category, which is not pleasant at all.
#9 Ignoring The Warning Signs of Your Credit Problems
The majority of us spend little time to check or credit reports. Most of us business owners wait for the yearly report, and this is not the right thing to do. Make time and check your credit reports every month to make sure that it is error-free. The longer you wait, the harder it becomes for the errors to be corrected. These errors can be damaging to your report and may lead to a bad credit rating that shows how you have been handling your payments so far.
#10 Co-signing Someone Else’s Loan
Co-signing is a type of loan applied by a relative or close friend that may lead to your business credit into a bad situation in case the borrower fails to pay the agreed amount of pay promptly. Whenever you co-sign any loan, remember you take part of the responsibility on the borrower’s behalf. In case the borrower fails to pay, the credit score of your business will automatically be affected. This means that being a co-signer post a serious problem in the making.
Increase Your Credit Score and Secure Your Tomorrow
These mistakes can easily affect your business credit scores. It may seem that doing the activities is very easy, but you need to put the effort into doing these tasks to make sure that you will not commit these mistakes that will eventually hurt your business credit scores.
If you want to know more about how to fix your credit score and what is the best kind of loan for your business, get in touch with our financial advisers for an expert consultation. We, at Bizzloans, exist to help your business grow through efficient ways.