How do you stay on top of your business credit? Are there rules that you should follow? There are certain basics that every business owner should be aware of to be able to protect their business credit. Although it may seem difficult to master and complex to learn, it is vital to understand how to protect your credit for future entrepreneurial adventures that you may have. If you already know some of the basics and the role that they play. It becomes easier for you to protect your credit. Below are things you should do to protect your business credit.
1) Build your business credit score
As you go on financing your business, it is helpful to promote growth, facilitate cash flow and prepare yourself for both setbacks and opportunities. Plus, for great financing, you need to establish a good credit score. As many people are aware of the importance of their personal credit scores, business scores are equally as important. Therefore, establish accounts to start building your credit scores. For instance, you can start with a trade line with one of your vendors or a business credit card.
2) Choose lenders that report to the bureau
In business, just as in life, it is vital to get the credit you deserve. Therefore, do business with vendors, net 30 account creditors, and other lenders that report to the commercial credit bureaus. Ensure that you do this with every creditor that you work with, as every positive account will be helpful. The more your motivation to stay on top of them increases, the more your credit scores will go up.
3) Use a business credit card instead of a personal credit card
Always keep your business and personal finances separate. When you start confusing the two, it will give you a lot of headaches. Plus, when your business struggles, your personal credit can take the hit too if you mix them. Besides, there is a credit advantage when you use your business card instead of the personal one. Because most lenders will not report to your credit report. Therefore, you can protect your personal credit score if you keep it away from any business activities.
4) Do not trade creditors abuse
Trade creditors are your business partners and it is wise to not abuse them. Although paying your loan or credit card payment is critical. And you are on time with payments, do not shaft your suppliers when you feel like, that is wrong. This is because it will affect your business when your trust between you and your suppliers ends. Not forgetting that many suppliers do report to the credit bureaus, thus your score will take a negative hit too.
5) Know your business credit score
Knowing your business credit score is vital to help you build it. Yet, many business owners still have no clue what is their business credit score. Fortunately, it is now easier to obtain this knowledge especially with the use of the internet. You can now consult business credit report providers to get individual credit scores and reports at a fee. However, some companies offer the same for free.
6) Check credit of your customers and suppliers yearly
When you are aware of the credit scores of your suppliers and customers it will help you know if they are a risk to your business or not. How can you know behind the scenes what is happening unless you check? Therefore, make sure you work with dependable clients and avoid digging your own grave with new clients. Unless you check through their business credit report to see how best they dealt with business partners in the past.
7) Monitor your credit
When you know your business credit scores, to protect them you need to keep an eye on them. Sometimes there could be harmful changes like misreporting and other errors, or even worse identity theft. Sometimes the changes to your report are your fault for instance when you do not pay all your bills on time. Therefore, prioritize timely payments to ensure you do not affect your score. In case you notice any errors contact the reporting bureaus and the company that reported.