In most cases business owners have to turn their savings into real investments if they wish for a successful business. This is another part of such a successful business that plays a role in establishing the creditworthiness of the business you desire to run. A good score will get you low insurance premiums, more credit opportunities from existing suppliers and lenders, and high credit limits. Plus, not all business owners have a good business credit score. This is because they often make small mistakes while working with their credit cards, and they do not search for companies that help build business credit without personal guarantee. These mistakes may be to your knowledge, but when the report reaches the business credit reporting agencies, it highly damages your business’s credit score. Such are the mistakes to avoid for a better credit score for your business. Below are 3 mistakes that can harm your business credit and how to avoid them.
Terminating old credit accounts
When you decide to terminate your old credit accounts, you are taking a high risk that lowers your business credit score unknowingly. Such termination cannot be compared to you disposing off your old sneakers since you do not need those shoes again in your shoe line, as compared to old credit accounts that play a role in the building of your business credit score. Such old credit accounts may be having a good credit history. Hence when you do away with them, you are withdrawing the good years of credit that had led to the current good credit score of your business. As a business owner, you have to retain your old credit accounts and keep them open. This helps you to evade losing the quality score and history of the payments you currently have. Do not close any credit account even after paying off any credit since it could hurt your business.
Co-signing somebody else’s loan
This mistake could be more disastrous to your business credit score since co-signing a loan for either your close friend or even a family, either of them can fail to adhere to the terms and conditions of repaying a loan. Do not forget to get a partial responsibility on behalf of the borrower when you are co-signing any loan. When the borrower fails to make payments, and you also fail to repay the loan as well, your business credit score will have a negative effect. Being a co-signor when one is getting a loan if you are not ready to repay the payments when the actual borrower fails is a potential disaster in the making. To avoid this mistake it is good to be careful and select a person who is trustworthy to repay the loan and get to co-sign for a loan with that person. Ensure you find out the chronology of the borrower in terms of making payments. Moreover, set time and go through the chosen means of loan payment by the borrower and decide whether it is within reach or a problem might arise later on.
Making late payments or missing the payments
The history of how you make payments, whether early or late, or the much you forfeit paying your bills is a factor in deciding your credit score. Whenever you fail to submit your payments on time, this makes your credit score keep going on low. A lot of misconceptions are there regarding making late payments or missing to make the payments. For instance, business owners may think missing two or three payments will not have a recognizable impact on their score, which is not the case. In building your business credit score, each payment not made categorizes you in the fair credit rating and denies you a good credit rating, which is so unfortunate. It is significant to ensure that you make all the necessary business payments on time to the vendors or creditors. In case you forget to make certain payments early enough to a supplier or vendor, it is good you engage them in an agreement and request them not to report the matter to the business credit reporting agency. This step will save you from lowering your business credit score.