Maximizing Your Financing Potential: Strategies to Improve Your Business Credit Score | Backd Business Finance (2024)

Maximizing Your Financing Potential: Strategies to Improve Your Business Credit Score

by Kieran Daly

|

June 7, 2023

Maximizing Your Financing Potential: Strategies to Improve Your Business Credit Score | Backd Business Finance (1)

When it comes to running and growing your business, maintaining a good credit score is crucial. A poor credit score can keep you from securing the financing that your business may need in addition to making other aspects of your life a little more difficult.

But what is a credit score, how is it calculated, and more importantly what can you do if you have a less-than-ideal credit score? Luckily there are steps that you can take to improve your credit score and Backd is here to help with our guide that covers the best strategies to bolster your score.

What is a credit score and how does it work?

A credit score is a numerical representation of an individual’s creditworthiness, which is then used by financial institutions and lenders to determine the likelihood that a borrower will repay any debts on time. Credit scores are generated based on various factors that relate to the credit history and financial behavior of an individual.

Credit scores are typically calculated by credit reporting agencies like Equifax, TransUnion, and Experian. Using complex algorithms, these agencies analyze an individual's credit history, including factors such as the length of credit and payment history, credit utilization, types of credit accounts, and recent credit inquiries. This results in a numerical value that ranges from 300 to 850, with higher scores reflecting better creditworthiness.

Each agency may differ slightly in regard to its specific calculation method, but in general, credit scores are based on a weighted combination of the following factors:

  1. Payment History: This includes the number and frequency of missed or late payments, in addition to any bankruptcies, foreclosed, or other negative marks on an individual's credit report.

  2. Credit Utilization: This is the amount of credit an individual is currently using compared to their total available credit. A higher utilization rate can result in a decrease in credit score.

  3. Length of Credit History: This considers the length of time an individual has held credit accounts and the age of their oldest account.

  4. Types of Credit Accounts: This includes credit cards, loans, and other forms of credit. A mix of different types of credit can be viewed positively by lenders.

  5. Recent Credit Inquiries: This looks at the number of credit applications made in a short period of time, as multiple inquiries can suggest a high risk of default.

Overall good credit scores are crucial to securing loans, credit cards, and other financial products at favorable interest rates and terms. It is important for individuals to maintain a strong credit score, but if you do have a lower score then there are steps that you can take to give your credit a boost over time.

How to Improve your credit score?

While having a poor or low credit score may box you out from securing certain types of financing or even accessing affordable terms and rates, it isn’t the end of the world. There are several ways that business owners can improve their credit score in order to apply for business financing:

  1. Pay bills on time: Late payments can have a negative impact on your credit score. Make sure you pay your bills on time and avoid missing any payments.

  2. Monitor your credit reports: Review your credit reports regularly to ensure there are no errors or fraudulent activities that can hurt your credit score.

  3. Reduce credit utilization: Try to keep your credit utilization ratio below 30%. This means that you should use no more than 30% of your available credit.

  4. Build credit history: If you have a limited credit history, consider opening a small credit account or getting a secured credit card. This can help you establish a credit history and improve your credit score.

  5. Use a business credit card: Use a business credit card for business expenses instead of a personal credit card. This will help keep your business and personal finances separate and can help you build a credit history for your business.

  6. Work with vendors who report to credit bureaus: If you work with vendors who report to credit bureaus, make sure you pay them on time. This can help you build a positive credit history for your business.

  7. Maintain a low debt-to-income ratio: Keep your debt-to-income ratio low by paying down debts and avoiding taking on too much debt. This can help improve your credit score and make you a more attractive candidate for business financing.

It is important to note that improving your credit score takes time, so patience is key while remaining diligent in your efforts to build and maintain a strong credit history. Once you have improved your credit score it is crucial that you keep in the habit of the practices that you have taken on to improve your score, as any errors in judgment or mistakes could cause your credit score to dip again.

Apply for Backd Funding With A Credit Score of 625+

When it comes to applying for the financing that your business needs to grow, Backd is here to help. The only credit criteria that we require is a minimum score of 625 and we utilize a soft credit pull so that your credit score is never affected when trying to secure the funds that you need to grow your business.

Backd offers working capital advances ranging from $25K to $2M with terms of up to 16 months and business lines of credit ranging from $50K to $750K with terms of 6 or 12 months. Securing funds with back is quick and easy, with an application that takes just 3 minutes to complete. Our team is always ready to help however we can with funding experts always on hand to help you through the process.

Whether you are looking to secure funds to finance your next big project or simply resolve gaps in your cash flow, apply today and you could have funds sent to your account as soon as tomorrow. Don’t wait to secure funds for your business, let Backd help you today.

Maximizing Your Financing Potential: Strategies to Improve Your Business Credit Score | Backd Business Finance (2024)

FAQs

Which strategy helps you improve your credit rating? ›

Pay on time.

One of the best things you can do to improve your credit score is to pay your debts on time and in full whenever possible. Payment history makes up a significant chunk of your credit score, so it's important to avoid late payments.

How do I build my business credit score? ›

How to Build Business Credit Quickly: 5 Simple Steps
  1. Step 1 – Choose the Right Business Structure. ...
  2. Step 2 – Obtain a Federal Tax ID Number (EIN) ...
  3. Step 3 – Open a Business Bank Account. ...
  4. Step 4 – Establish Credit with Vendors/Suppliers Who Report. ...
  5. Step 5 – Monitor Your Business Credit Reports.
Dec 5, 2019

Can financing improve credit score? ›

A single payment that's late by 30 days or more can do serious harm to your credit scores, but every timely payment you make on a personal loan (or any of your other debts) adds to your positive payment history and helps promote credit score improvement.

How will you manage your finances to ensure you have a strong credit score? ›

Pay your bills on time

Prioritize and schedule your monthly payments, making sure to pay at least the minimum payment on time every month on all your accounts. Try to pay more than what's due whenever possible. This helps to pay down debt faster, save on interest expense and may improve your credit score.

What are 3 things you can do to improve your credit score? ›

Ways to improve your credit score
  • Paying your loans on time.
  • Not getting too close to your credit limit.
  • Having a long credit history.
  • Making sure your credit report doesn't have errors.

How can I improve my company's credit rating? ›

There are several steps you can take to improve your company credit score:
  1. Pay on time. ...
  2. Avoid County Court Judgements (CCJs) ...
  3. Make changes if you notice a drop. ...
  4. Check the credit score of your suppliers and customers. ...
  5. Share data with a credit reference agency. ...
  6. Don't apply for credit unless you need to. ...
  7. File on time.

How does financing help credit score? ›

Though they're a form of debt, personal loans can also serve as a tool to build credit. This is because they can contribute to your payment history and credit mix, as well as lower your credit utilization ratio. Collectively, these three factors account for 75 percent of your credit score.

Does financing boost credit? ›

As long as the lender reports your account activity to the three major consumer credit bureaus, using it regularly and making your monthly payments on time can help you build credit.

How can I improve my credit score for a loan? ›

Take these steps to increase your CIBIL score and boost your chances of securing credit in the future.
  1. Check Your Credit Report. ...
  2. Make Corrections to Errors. ...
  3. Note Your Credit Utilization Ratio. ...
  4. Don't keep applying for credit if rejected. ...
  5. Keep the frequency of applications low. ...
  6. Pay your loans. ...
  7. Pay your credit cards on time.

How can I make my finance strong? ›

7 steps to financial stability
  1. Invest in yourself. Having further education, more knowledge, and required skills for work can support your career advancement. ...
  2. Make money from what you like. ...
  3. Set saving and expense budgets. ...
  4. Spend wisely. ...
  5. Set emergency fund. ...
  6. Pay off debts. ...
  7. Plan for retirement.

How do you manage finance effectively? ›

7 Money Management Tips to Improve Your Finances
  1. Track your spending to improve your finances. ...
  2. Create a realistic monthly budget. ...
  3. Build up your savings—even if it takes time. ...
  4. Pay your bills on time every month. ...
  5. Cut back on recurring charges. ...
  6. Save up cash to afford big purchases. ...
  7. Start an investment strategy.
Jun 27, 2023

How to build a perfect credit score? ›

How to Build Good Credit
  1. Review your credit reports.
  2. Get a handle on bill payments.
  3. Use 30% or less of your available credit.
  4. Limit requests for new credit.
  5. Pad out a thin credit file.
  6. Keep your old accounts open and deal with delinquencies.
  7. Consider consolidating your debt.
  8. Track your progress with credit monitoring.

What is a good strategy if you want to improve your credit score on EverFi? ›

Paying your bills on time and in full can raise your score by up to 100 points and improve your credit report over time. Pay down your balances: This is another important thing you can do to repair your credit score, as it shows that you are reducing your debt and improving your credit utilization.

What is the best way to build a credit rating? ›

  • Monitoring your payment history. Your payment history is the most important factor for your credit score. ...
  • Using credit wisely. Don't go over your credit limit. ...
  • Improving your credit history. ...
  • Limiting your number of credit applications or credit checks. ...
  • Diversifying your credit.
Sep 27, 2023

What is a good strategy if you want to improve your credit score in EverFi Quizlet? ›

You can improve your credit score by making timely payments in full amount. Also pay monthly balance on time and every time.

What is the best way to improve your credit quizlet? ›

You can increase your credit score by paying bills on time, using a low percentage of your available credit, and using a variety of credit types. Opening several new lines of credit at once can hurt your credit score.

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