Business Credit Center

10 tips for improving your business credit score

Experts suggest these tips to help build and maintain a strong business credit score.

Published: August 08, 2016

In addition to other factors, lenders will look at your business credit score, which is part of your overall credit history, when making their decision regarding your credit application. These 10 steps can help you build your business credit score or improve it.

1. Get your business credit started. Many small business owners use personal credit to get their businesses off the ground, but it can actually be more beneficial in the long run if you establish business credit right away. "If you manage all of your risk using personal credit, you aren't establishing any good credit in the business's name," says Adam Fingersh, senior vice president and general manager of Experian's Fraud and Identity Business.

2. Review your credit score. Joseph Schmidt, senior vice president in the Small Business Lending division at Wells Fargo, recommends pulling your commercial credit bureau report and business credit score from the three top credit agencies (Experian, Equifax, and Dun & Bradstreet) before pursuing credit. Schmidt also suggests looking at them one year after the business is established and at least every three years after that — or more frequently if the business has a lot of credit. "Look for incorrect information or areas that need improvement," he says.

3. Expand your business credit history. This could include using credit cards, lines of credit from vendors, or other business loans responsibly. Schmidt points out that if a business has no credit history, it could negatively impact a lender's decision. "The more positive credit performance you have, the more positive information the lender has to base their credit decision on," he says.

4. Don't max out your credit. It's important to have credit, but you don't want to use it all, says Tracy Yarmolich, AVP of product development at Equifax. "A highly utilized credit line can be seen as a negative," she says.

5. Separate your business and personal finances. It's important to separate your business's financial activities from your personal transactions. "This ensures that the business's credit profile is driven solely by the business's activities," says Fingersh.

6. Pay your bills on time. One of the behaviors that has the greatest negative impact on a business credit score is stretching bill payment beyond the agreed upon terms, says Fingersh. "Consistent good performance builds the strongest credit," he says.

7. Crack down on collections. If you're going to pay your bills on time, you need adequate cash flow and that means getting paid on time, says Grafton "Cap" Willey, managing director of CBIZ Tofias. "You've got to turn your invoices around and get collections in if you're going to have enough cash to pay your bills."

8. Check your credit score regularly. Yarmolich indicates that unlike personal scores, frequent business credit score inquiries generally are not viewed negatively. "We know businesses go to multiple institutions to find the best terms, so inquiries are not a heavily weighted attribution," she says.

9. Communicate with creditors. As soon as you miss a payment, talk to your bank or vendor, Yarmolich suggests. "Call them and be honest," she says. "Maybe you can work out alternative arrangements."

10. Don't give up. Fixing a bad credit score can take two to three years of diligent effort, but it can be done, says Willey. "Go into this process knowing that it will take a while," he says, "and try not to get discouraged."

Learn more about how potential lenders evaluate your business credit score.