A good business credit is something every small business owner should build and maintain. A less-than-perfect business profile may discourage some important lenders to give you new business loans and turn out to be the biggest hindrance in the growth and success of your business.
While you know your credit score is important, do you have the slightest idea about all the wrong that you are doing that might sabotage it?
Read on to find out some leading credit score terminators:
Under-utilization of credit
It is true that in many cases, credit usage may instil bad credit habits and encourage pointless spending. Many cautious spenders, as a result, prefer not to use credit cards.
This however, turns out to be pretty fatal when it comes to securing new business loans as no transaction on credit cards leads to your credit file becoming inactive. This may unfortunately bring down your credit score drastically.
Ignoring report errors
Research says that 25% of small business owners, who check their business credit reports after long, find errors that put them in a riskier category. Unfortunately, these mistakes, caused mostly due to incorrect or outdated data, can be disastrous for business funding.
Not only could this instigate lenders to reject your financing application, but it could also force you to pay your suppliers cash on delivery for inventory, along with higher insurance rates for your business.
To avoid this unpleasant surprise, review your credit report regularly and carefully, and make sure your profile is accurate.
Any inconsistency in the cash flow cycle of your business, such as slow or delayed payments, can hurt your future business deals and business funding.
Such activities indicate that either you are not serious about repaying your current debt or you are not capable of repaying them at all. As a result, your credit score begins to dip miserably.
To make sure this problem does not take your focus away from your business and cause unnecessary panic, it is actually a good idea to pay your dues before time.
Over-utilization of total debt
Crossing limits is never a good idea. Frequent use of full credit card limit can often adversely affect your chances at new business loans. A lower balance increases a borrower’s chance of repaying the loan and makes the lenders feel reassured. The closer you are to your limit, the more your credit score drops. It is advisable to use only 30% of your debt limit.
Impact of personal credit problems
Having a thin personal credit file can put your need for business funding in a weak spot. A poor personal credit history is a common stumbling block for entrepreneurs because it reflects your inability of managing your business credit, making it a red flag for most lenders. Making timely payments can help improve your personal credit score and in turn your chances of bagging new business loans.
If you are looking to acquire business funding anytime soon to further your business and its growth, be sure to avoid these top credit killer mistakes.