Taking Out a New Loan Can Help Your Business Credit Score
September 14, 2021
Your business credit score can be complicated. There are multiple different reports, published by different agencies. These reports cover all sorts of information:
How many lenders does your business work with?
How much does your business owe, and to whom?
Have you been paying your business loans back?
Have you been paying your business loans back on time, every time?
Does your business have any bankruptcies?
Does your business have any liens?
…and the list goes on. There are also many indicators provided based on proprietary formulas, meaning that the calculation is not fully transparent. As a result, these reports can be overwhelming.
Six Steps to Improving Your Business Credit Score
As a small or medium sized business executive, you may not have the time to fully dissect every part of these reports. You simply want to know how you can improve your business credit score right away so that you can get access to the opportunities that your business needs in order to grow.
When in doubt, maintaining a healthy credit history is the best thing that you can do to improve your business credit score. There are lots of ways to improve your credit history.
One of the most powerful ways to improve your credit history is by taking out a new loan. How does this help?
New loans increase the total amount of credit that your business has access to, which is positively factored into your credit score
New loans give you a chance to prove that your business can make timely payments. Here is where it is important to make sure that your business acts in a financially responsible way. If you cannot make the payments on time, taking out a new loan will definitely not help.
New loans decrease your Credit Utilization Ratio. A decreased Credit Utilization Ratio will positively factor into your credit score. This ratio shows how much of your credit lines you are currently utilizing, so it will only improve if you limit how much you actually use the new credit line.
Understanding why opening a new credit line is important to your business credit score is only half the battle. Now you have to actually open a new credit line - and there are many different products out there. It is another time consuming process trying to figure out which products are good quality and also match your credit profile.
Scorico can help you with this. As a Scorico member, we constantly monitor your credit situation and make suggestions to help you improve it.
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