A business’s credit rating is essential to the credit review process and a good score demonstrates financial responsibility.
While it’s hard to break bad financial habits, doing so will help make your business a success.
For small business owners, a good business credit score is a boon as it means that your firm will benefit from better trade credit, lower interest rates, as well as unobstructed access to the financial support that you need to expand and sustain ongoing business. A few silly mistakes could damage your credit rating and make it much harder for your small business. For example you might not be able to get that loan you need with a bad credit rating or it might affect future partnership opportunities. Here are the habits you need to break to ensure you don't acquire a bad credit rating.
1. Not checking your credit score regularly
Checking your credit score is easy to do and it’s free. You should not overlook the importance of looking into your annual credit report as it is vital to your financial health. It's important on so many levels. Firstly if you had bad credit, it is a key means to track and rebuild good credit. Secondly it is a useful tool to ensure everything is on track. Additionally it is good to keep your eye on reports to make sure all your information is accurate.
2. Late payments
The expression is 'better late than never' but when it comes to making payments any late payment is a mistake! Make sure you diligently pay everything on time, no matter what. Be diligent and create a payment schedule that you unwaveringly stick to.
3. Making minimum payments
It may be tempting to pay the bare minimum with every bill you receive but you should really try to pay off as much as you can as soon as you can. The longer you delay paying off your bill the more likely it is that you are going to rack up charges that you cannot afford.
4. Frivolous purchases
Don't use credit as means to buy anything and everything you want for your small business. There may be months you have to make cut-backs instead of putting everything on credit. You need to manage expenses as efficiently as possible, and this means not splurging on unnecessary items. If you keep purchasing expensive items for your business, you might quickly find yourself up to your eyeballs in payment demands that you cannot afford to pay back.
5. Linking your business and personal credit
This is simply a mistake you should never make. Even if you think it might make things easier, convenience is no excuse, personal and business credit should never be connected. If you already got into the bad habit and these accounts are connected, undo it. If ever your small business goes bankrupt and the financing is in your name, you might well have to declare bankruptcy personally. This would be damaging for you all round as this could stay on your credit report for seven to ten years.