Why is business credit history important?
Past payment habits and credit history play a significant role in a businesses' future borrowing potential. How do you build a positive business credit?
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There are four important reasons to monitor your business credit report, Please check the same below:
1. Avoid unpleasant surprises: Your business credit profile is often the basis for decisions others make about your company. It is used to determine how much money lenders will loan you, how much credit suppliers will extend to you, what interest rates you'll be charged and what you'll pay for insurance premiums. That's why it's important to know what's in your business credit report and monitor it for accuracy and changes.
2. Protect your business: Business identity theft and fraud losses cost American companies billions each year. Both can negatively impact cash flow, cause problems with creditors and suppliers, and even affect your business's reputation. A great way to help protect yourself and your business is to regularly check your company's credit report for unusual activity that might indicate fraud.
3. Correct mistakes: Your credit report paints a picture of your business for the world to see. Out-dated or incorrect information can give the wrong impression about your business resulting in unfavorable decisions that negatively impact your bottom line. By keeping track of your business credit report you can identify inaccuracies and request corrections.
4. Build your score: A poor business credit score can make it difficult, or even impossible, to get funding and obtain lines of credit for your business. The first step in improving your score is to become aware of the factors that drive your current company credit score. By managing these more effectively you can make a positive impact on your credit score, which can lead to more opportunities to grow your business.
Business payment history is the lion's share of what goes into your business credit scores. Other factors are outstanding judgments, liens, etc. But the big one is payment behaviors.
Pay on time or early, as in full as you possibly can (i. e. go beyond the minimum amount to as full as your budget can stand), and that will help build your business credit.
Another piece of the business credit puzzle (it happens to be true for consumer credit as well) is to check your reports - not just your scores - and dispute any errors as soon as you can. No sense in allowing a mistake to drag down scores when you can do something about that!
Part of your answer is contained within your question (i.e. past payment habits). I would recommend that you take advantage of any early payment discounts that may be offered and ensure that your payments remain current. A review of suppliers account statements on a regular basis will provide you with information regarding your payment habits.
Another easy method is to obtain small bank loans from time to time which you can easily repay. Over several years your loan payment history will help provide assurance for any real needs that may come along that require credit assistance.
In short, preparing for a good credit history can definitely help if trouble ever arises. This way your never stuck without credit assistance.
Your Business Credit History is important for all sorts of reasons.
Just like your personal credit history it helps to show would be lenders your past payment history.
It demonstrates to them that you may have the ability to repay loans that you take out.
A small business credit history may be more or less complex than your personal credit history, depending on the age and type of your business.