Build a Better Credit Score for Your Small Business

Having a good credit score is imperative for any small business owner. Creditors simply won’t lend money to people they deem unlikely to pay it back. A good credit score lets the financial world know that you and your business are reliable and can be trusted to repay loans and other bills. Establishing a stellar credit history doesn’t happen overnight, but there are some simple measures that can be taken to show that your business is creditworthy.

Separate Your Personal and Business Accounts

An effect way to protecting the creditworthiness of your business is to set up accounts in your company name. It’s easier to get a loan if your business is an established one with an address on file and a record of paying its bills each month than if you are a freelancer working out of your house. Lenders will take your business more seriously if it has its own identity.

Even if your personal credit score or credit history is less than admirable, establishing a record of positive business transactions improves the creditworthiness of your business. Keep your personal and business accounts separate, and maintain a good record of company payments. Showing that your business pays it bills and debts on time shows that it is a good candidate for funding.

Another effective tool for building a good credit score is a company credit card. This can help you to quickly establish a credit history for your business. As an added bonus you can rack up points to be used for prizes and rebates while you are building a credit record. As long as you pay your statement on time every month your credit score will increase accordingly. A good practice is to maintain a balance of less than 30% of your card’s limit. This shows that your business is not entirely dependent on credit.

Build a Better Personal Credit Score

As the owner of a small business; your personal credit score will reflect the creditworthiness of your business until it can establish a history of its own. A good personal credit score will help you to gain easier access to capital, build trust with those you do business with such as banks or vendors, and most importantly show that you are a good credit risk.

Some things you can do to improve your personal credit score are:

• Know what your credit score is and understand how it is calculated.

• Obtain a major credit card such as MasterCard or Visa and pay it off regularly.

• Use credit only when you really need it. Borrow a small amount that you can pay off quickly and easily and your credit score will improve dramatically. Not using credit at all will hurt your credit score, as it will reduce your credit history, which makes up 35% of your credit rating.

• Pay your bills on time and even pay in advance when you can. Some vendors may give discounts for up-front payments. If you are able to do so, you can lower your operating costs and improve your cash flow at the same time. This both prevents black marks on your credit report for late payments and lowers the cost of your inventory.

Banks and other creditors take a risk when they provide you with capital. It is therefore important to make your goals and how you plan to reach them very clear. As your company moves from the start-up to growth stage, you may very well need additional funding, and lenders want to be sure that you are not a bad credit risk. Pay your bills on time and build a solid credit history so that financing is available when you and your business need it.

Ethel Wilson is a financial and credit specialist with 12 years experience in the banking, credit scores, and financial industry. She has advised countless clients on how to improve their credit score rating. She now shares the best of her credit score rating information as a contributor and editor of

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About Collaborative Post is happy to provide guest posting opportunities for small business owners. This article was created by one of our contributors.

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