Now that you know exactly how important your credit score can be to your personal life, it’s also important to realize that your small business can be affected in the exact same way. A poor score can prevent you from getting a loan, could mean you’ll pay more for insurance and could prevent you from cultivating positive relationships in your industry. Let’s see what you can do right now to raise your credit score in as little as 30 to 60 days.
#1 Check Your Credit Report
Before you can work on fixing your credit, you’ll have to find out exactly what is wrong with it. You are entitled to a yearly free credit report and can get it from any of the 3 major credit reporting agencies (Equifax, Experian, or TransUnion).
#2 Dispute Any Errors to Immediately Raise Your Credit Score
Once you see the marks against your credit you can make sure that they are legitimate. Credit reporting isn’t always exact or timely. If you happen to find an error you can dispute it. The error could be something that you have settled or could be a something that you never owed in the first place. The only way to get it removed is through the dispute process.
#3 Negotiate Late Payments
Of course, if you do have late payments on your record you could ask the creditor to do a “good-will adjustment” for you to help raise your credit score. If you have a solid credit history with them and only were late once or twice, you might be able to get the negative mark removed. Make sure that when you are asking for this adjustment that you stress your positive credit history with the company. This is especially effective if you had extenuating circumstances that caused the late payment(s).
#4 Monitor Your Credit Use
You need to be aware of how credit actually works. A person or company with good credit uses between 20%-30% of their available credit every month. Any less or any more and the credit reporting companies will ding your FICO score.
There are two ways to stay in the golden range – monitor your spending so that you only use a certain amount of your credit, or if you have set bills you pay with your credit cards, ask for an increase in your limit so that the total usage will fall in the 20%-30% range.
Don’t close any credit accounts. If an account is closed, your available credit goes down, which is not a positive signal to credit score adjusters.
#5 Get Multiple Types of Credit
Instead of putting your office furniture on a credit card, get a small business loan from the local credit union. Having a diverse credit base is a small, but effective way to boost your credit rating.
#6 Pay Twice a Month
Pay your bills on time, and if you can, pay them twice a month. The first payment should be made before the closing date and the second right before the due date. This way there is enough time for the credit card company to process the payments correctly and show the on-time payment while still showing a 20%-30% used credit rate.
Stay tuned for future credit advice on how to raise your credit score from your favorite East Bay CPA! Next week we’ll be talking about why you shouldn’t wait to think about getting your tax preparations underway!