How Can I Improve My Business Credit Profile?

You can proactively improve your business's creditworthiness. How? Follow these seven important steps.

1. Paying on time. The payment experiences other companies have with you are the most impactful data in your business credit profile. For this reason, you should ensure that you pay within the terms set forth by your suppliers. This is the most direct way to drive a positive credit rating.

2. Ensuring all relevant trade experiences are represented. Are you paying large sums on a timely basis to key suppliers and lenders that aren't being reflected in your profile? If so, you are missing out on a key opportunity to get the credit you deserve for paying your bills on time and for conducting a larger volume of business. You should check your profile twice a year, to make sure that all the vendor payment relationships are captured.

3. Keeping your personal finances in good order. If you are the owner of an emerging business, until your company develops a robust credit profile of its own, your consumer credit profile also may be reviewed by prospective creditors. How well you manage your personal finances can impact your company's creditworthiness. Keep in mind, though, that your business and personal ratings are separate and distinct. One is not used to directly impact the other.

4. Keeping your business credit profile in good order. Make sure the information in your business credit profile is complete and consistent. If you see accounts that aren't yours, mistakes your bank made or false negative activity you've already addressed, you should address these inaccuracies. Some business credit companies like Dun & Bradstreet and Experian offer online tools and customer service to help you update and manage these kinds of details in a timely manner.

5. Keeping your debt financing down. The capital structure of your business — that is, the extent to which you use equity or debt to finance your operations — is an important determinant of your creditworthiness. If other companies see a lot of debt on your balance sheet, whether in absolute terms or relative to your competitors, they are less likely to extend credit as you pose greater risk of default.

6. Contributing to your own profile. Some credit managers prefer detailed reports with a lot of supporting information, enabling them to assess risk based on a broader frame of reference. Communicating as much information about your business as you can to the company managing your business credit profile ensures a more robust report. Likewise, doing business with companies that you know frequently report their experiences to us builds your profile.

7. Keep an eye on the key financial indicators in your own report to see how they compare to other companies in your industry. In doing so, you can benchmark yourself, identify areas for improvement and assure a profile with adequate information for a satisfactory credit investigation.