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Want to Improve Your Business’s Credit Rating? Use This Checklist

By Citizens Bank Staff

A strong credit rating is a key factor in securing financing at favorable terms. The earlier you begin building good credit habits, the better positioned you’ll be when it’s time to apply.

Use this checklist to bolster your credit profile and keep it strong.

  • Know where you stand: Review your credit reports from the three major business credit bureaus. If you’re applying for an SBA loan, knowing your FICO Small Business Scoring Service (SBSS) score is also important. Report any errors to the bureau that has faulty information. Each bureau’s website explains its process for correcting errors.
  • Pay bills on time: On-time payment history is the biggest contributor to a business credit rating, so make prompt payment a priority. If you foresee trouble making a payment, let the supplier or creditor know. Proactively making some other arrangement may keep the late payment from being reported.
  • Increase reports of on-time payments: Ask vendors, suppliers, and creditors with whom you have a solid payment history to report your payments if they are not doing so now. (There’s no cost for them to do so.) The more positive payment experiences on your report, the better your score may be.
  • Lower your credit-use ratio: Aim to cap your outstanding balances at 30% of your total credit limit, or even lower if possible. A higher credit-use ratio signals an overreliance on credit, which could hurt your score.
  • Avoid closing accounts: Keep good-standing credit card accounts open, even if they have zero balance and you no longer use them. Closing these accounts essentially erases the effort you took to pay them down. Avoid opening new accounts simply for the sake of having more low- or no-balance accounts on file — that will hurt your rating by shortening your average account age.
  • Mind your personal credit: Your personal credit will likely play a role in business lending decisions, particularly if your business is young. Apply the same good habits you use to manage your business credit to protect your personal score. Request free copies of your personal credit reports each year, and take action to improve your profile if needed.

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