Building Credit Is a Smart Business Decision

by Rutuja shah Digital Marketing

Building your credit in a smart way can help you achieve your goals — better credit standing means a prolific financial future. Being on top of your accounts and making smart decisions is fundamental when it comes to improving your credit standing.

A business credit file helps in conveying a company’s financial health and companies with strong credit history reap several benefits. Establishing a repute is an arduous task for small businesses and start-ups. However, by establishing a good company reputation with a sound business credit file, entrepreneurs can solve many problems at once.

Additionally, a strong business credit file can help in funding, as well as credit risk management. Adhering to a good credit-building strategy plays a huge role in constructing a good perception towards your business.

Here are the five best tips for building a strong business credit file:

Essential Elements of a Good Credit-Building Strategy:

1. A Consistent Business Identity

Want your business to be viewed as a professional entity? Create and build a consistent identity. How? Use the same business name, address, and phone number on all your correspondence, invoicing, and marketing materials. Moreover, doing so will help in separating your personal identity from your business identity and help the business credit bureaus to maintain more accurate files of your company.

2. Procure a Dun & Bradstreet D-U-N-S® Number

Business owners and stakeholders check another company’s credit profile by using that company’s D-U-N-S® Number. If your business does not own one, other professionals may not view your business as legitimate until it does. Since it is a universal business identifier, it can help you get a favourable line of credit. A lot of organisations have even made it mandatory to obtain a D-U-N-S® Number before you can do business with them.

3. Low Credit Balances and On-Time Payments

Paying bills on time can be the foundation of building good business credit. Keeping your business credit balance as low as possible or even paid off can have a significant influence on the quality of your business credit scores. Ideally, your balance should not exceed 25% of your credit limit, even if you pay your balance off at the end of every month. Staying below that threshold could help improve your credit, and more companies will be willing to work with you if you show a history of conservative borrowing.

4. Credit Monitoring Tools

Your business credit rating can change overnight, hence, it is important for you to keep a track of these changes and take appropriate action if anything is amiss. There are free business credit monitoring tools available that automatically notify you if there is any change in your scores and ratings.

5. A Diverse Business Credit Report

You should begin expanding your profile to include credit accounts from various lenders, once your business credit is established. The more diverse your business’ credit file is, the better its credit score can be. As your business grows, you begin to approach new challenges, such as getting a loan or securing a large contract.