Your business credit score is built the same way as your personal score. Your business is assigned a number, called a taxpayer identification number, and any lender doing business with you will ask for this number. Then, the lender will report how successful you were at repaying your debt to the major credit agencies, and the agencies will file the reports under your number. If you want to increase your score, try these tips to associate positive debt arrangements with your tax payer ID.
File Loans in your Business Name
The first and most important step to increase your credit as a business is to make sure all of your debts are in your business name. When you first open your doors, you may take loans in your personal name or in the name of one of the owners. This is often necessary since your business has no credit of its own. However, as the business grows, it will develop a legal identity and a financial profile. This can be used to secure debts independent of your name, and you should begin making these arrangements as soon as possible. If you have a business loan secured with your personal information, replace this with a
business loan secured in the business's name as soon as possible.
Grow your Business Capital
Credit is determined using a complex algorithm, and a key part of this algorithm is how much worth your business has compared to its debt. By building up your assets and capital, you can increase your business's credit score. If you do not have a large initial asset base, consider taking on investors. Unlike loans, funds from investors do not count as debt, and they will only add to your asset base without increasing your debt load.
Open a Business Credit Card
A factor in the way your credit is calculated is a comparison to the potential credit available to you versus how much of that credit is currently in use. By increasing the amount of credit in your business's name, you can boost your credit score. Open a business credit card, and use the card wisely. As long as the balance remains low, this will help your score. Do not open too many credit cards, however, as this can also drop your score. Instead, you should have a
healthy credit-to-debt ratio without having too much available credit.
Pay Debts on Time
The most basic advice about credit is also the best: build your credit by paying your debts on time. When you pay off your credit card each month, you receive a little boost in your score. These two or three points each month can add up to huge increases in your credit score. You will see the largest increases when you pay off big loans, such as your start-up loan. To keep these boosts coming, finance business materials or machinery and pay off the debts on time. If you
continue this record, your business will have a very high rating in just a few years.
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