5 Mistakes that could hurt your Business Credit

Good business credit can be advantageous for company in several ways, including lower interest rates on loans, higher credit limits and better financing options. Unfortunately, many entrepreneurs damage their company’s Credit Score with simple attitudes and in ways that could be avoided. Know the 5 common mistakes entrepreneurs make that end up hurting their companies’ credit scores:

Closing old accounts. It can seem like a good idea to discard something that is no longer in use, however, when it comes to “bank accounts”, this can have a negative impact. If you choose to close a credit account, you could lower your business credit score, especially if the account is in good standing. Remember that pre-existing credit plays an important role in determining business credit. Even if you do not plan on using this account, simply having it available could raise your score.

Not paying on time. How early or how late do you usually pay your bills? The answer to this question is what will raise or lower your credit score. Whenever you pay a bill late, you can be sure that there will be a drop in your credit score. Of course if you cannot afford the payment, there is not much you can do. But if you are delaying your payments due to procrastination or forgetfulness, you are damaging your business credit for no reason.

Using credit excessively. How much you use credit is one of the most important factors in determining your Business Credit Score. We know that it is automatic, the more credit you have, the more you increase your usage rate. However, credit bureaus expect you to only use a small portion of your limit. If you use more than 30%, banks may see this as a sign that your company has encountered financial problems and this could affect your score.

Not using credit enough. Even if you only keep your credit accounts for emergencies, you must use them at least once a month. Remember that to improve your Credit Score you need to demonstrate your ability to make consistent payments. If you have no history of use or of paying on-time, it will likely hurt you credit score.

Opening several accounts. Credit card companies are always looking for ways to attract the interest of business owners, but be sure to focus on building your credit over time. If you open a lot of lines of credit in a short period of time, you will notice a fall in your Business Credit Score, as well as a reduction of the average age of your existing accounts, which can be seen as a sign of financial difficulties or even a desperate search for credit.

Still don’t have credit? Read our post on how to build business credit and contact us to find out the secret of how to build business credit in 30 days

Credit Department
Dominium Consulting