Would you like to see better capital approvals?
Are you seeking to close a deal on favourable terms?
If the answers to these questions are in affirmation, then maintaining a good business credit score is no more a choice but a necessity.
As an entrepreneur or a businessperson, if you want to afford necessary purchases hassle-free, you will need a decent credit score to qualify. Most lenders consider business credit scores before sanctioning the funds.
To maintain a good credit rating, therefore, is essential.
Do you wish to qualify for Quick Loans in Ireland effortlessly?
What is a credit score?
A credit score is a number that is generated by the credit analysing agency summarising the financial business health. It takes important elements into consideration like working capital, past payments, cash flow, and debt to calculate your credit score.
Several factors influence a credit score. A business credit score near or above 100 is good in the UK. Whereas, if you have a credit score close to 0, you will struggle to get a desirable loan or a favour from suppliers. As a result, it is critical to maintaining a stellar credit score.
Best Ways to maintain a good credit score
Maintaining a good credit score can be accomplished in several ways.
- Don’t miss any payment
Late or missed payments can affect your credit score severely. Ensure to pay funds on time, ensure a powerful and streamlined cash flow management to avoid lacking the funds.
For ensuring timely payments, set up an alert or identify software that could help you track your pending bills and pay them automatically online before the deadline.
- Review your business credit score frequently
You can’t figure out your credit score health if you don’t monitor it frequently. Business owners should review the business credit score 3-4 times a year.
While checking your credit score report, identify missed or pending payments, review your credit history and new credits.
Look for the vendors or payments that are missing from the report. Ask the vendors to report the payments. Maintaining good standing with them can enhance your credit score.
- Maintain your Credit Utilisation Ratio
The Credit Utilisation Ratio is the amount of credit currently being utilised divided by the total amount of revolving credit. In simple words, it is the amount you owe divided by the current credit limit. It is expressed in %.
As per the rule of thumb, keep your current utilisation ratio of 30% as per Forbes. To achieve a good CUR, pay down all your bills or talk to your lender to increase your limit. Alternatively, you can open a new account.
- Report any incorrect information (if any)
Begin by closely reviewing the credit score report. If you find anything incorrect during analysis, then contact the respective person or agent and dispute it. There is no point in losing on something that you don’t owe. It is one of the critical aspects of improving your credit score.
- Analyse personal credit score
While it might seem impossible, but a low personal credit score can also affect the lending capability of financial firms and suppliers. Though it is a rare possibility, a lender can consider a personal credit score report if there is not much data available for business credit score consideration and evaluation.
For this reason, it is a practical and wise thing to maintain your personal credit score as well. It will help you stand against the odds.
- Make payment before the due date
Rather than waiting until the deadline to pay the pending payments, release them early. It will help you improve your Credit Utilisation Ratio (CUR) and also your credit score standing.
Apart from this, paying early grants you freedom from paying interest. If you drag up a loan for 10 years, the interest rate will increase at an alarming rate. This situation might further make the situation worse for you and multiply your liabilities.
This will prevent you from grabbing a good business loan deal and cracking one in business.
Thus, it is advisable to pay the bills before the date, ensure a good score on the board, and meet your business loan requirements hassle-free.
- Identify the urgency before taking credit
While sitting and exploring online, you might hit a good credit opportunity for meeting your business goals. Avoid this temptation. This temptation might lead to undertaking several short-term credits whereby you may find it complicated to pay off the bills.
It can trigger a credit inquiry on the business. And it is a nightmare for any business. While inquiry, ask for a quote and limit the potential damage.
- Be upfront in case of cash shortage
Every business runs out of money every then and now. Eventually, it affects the company’s ability to pay the bills timely.
Instead of contacting the suppliers and explaining the situation, take charge and evaluate how quickly you can meet the payments and ensure credibility among the lenders and suppliers. Apart from this, analyse the expectations of the suppliers and lenders and understand how you can make ends meet and ensure good financial standing.
- Educate yourself
Education is imperative for ensuring a good credit standing in front of creditors. A lot of company owners and decision-makers are having slightly or completely clueless about how a credit score is calculated.
To ensure frequent cash flow and seamless credit history, it is imperative to understand the base of credit score calculation. There are various factors to consider under this:
- Typical business payment habits
- Outstanding balances
- County court judgements information
- What does your business do to use credit efficiently?
- Trends in your industry
- Business trade experience
These are some factors that affect and decide your credit score. Check off each on a positive note.
- Avoid County Court Judgements (CCJ)
CCJ are court orders that are registered against a business that cannot pay the dues within the deadline or after a warning. If a business cannot pay a CCJ within 28 days of receiving the judgement, it will remain on your credit report for 6 months. It may consider instant loans in Ireland for meeting the urgent fund requirement.
Whereas, if you never miss out on CCJ, you will never receive a warning letter. So, it is advisable to pay the dues before CCJ takes action against you.
Thus, this is how you can improve and maintain a business credit score.