Tips for Business Credit Repair
As a business owner, you probably spent years building up your business credit, which you need for loans, vendor contracts and other financial needs. However, a recent downturn in the market, recession, lack of customer payments or any number of other factors may have forced you to miss payments on your own accounts, damaging your credit rating. These are some tips to help you repair credit.
Reduce Your Revolving Credit
Revolving credit includes your credit cards or lines of credit. These accounts expand your available credit, which is great when you need a little extra help, but if you have too much available, financial institutions may hold this against you because you could go out one day and take advantage of all this credit, putting you in a position where you may not have the ability to pay it off. Therefore, your available credit should be reasonable for your business.
In addition, your utilization rate on your revolving credit can impact your ability to get additional financing because it damages your financial position. In most cases, you should keep the amount of money you owe on your revolving accounts at less than 30% of what you have available. This may seem low, but this rate suggests that you could pay off your debt quickly. In fact, it is best if you can pay off your revolving debt every month.
Rehabilitate Old and Open New Accounts
If you have debts that you could not previously pay, find a way to work with the creditor to get everything paid off. These lenders may remove negative credit postings if you make several consecutive on-time payments. Don’t fear reaching out because they may allow you to settle the debt, work with you on lower payments or reinstate your account after you begin making regular payments again.
You should also open new accounts because you may need a little extra available funding while you repair credit. However, maintain the 30% ratio of available to utilized financing. In addition, make sure you pay your new creditors on time. Automatic payments are beneficial tools for ensuring that you do not fall behind on your debts.
As you pay off your accounts, do not let them sit stagnant for long periods of time. Continue making small purchases, but make sure you pay them off right away.
These are only two methods for improving your business credit, but it may surprise you how much impact they have. Consider implementing these tips and learning more as you get your business on a better financial foundation.