5 tips in honor of National Credit Education Month
Aside from the fact that you should avoid racking up debt, if you ever want to apply for alternative financing, the lender will likely need to know your credit score. Understandably, many business owners get stressed out when it comes to maintaining or improving their credit scores. In this post, we’ll offer five tips to improve your personal and business credit scores, so that you can responsibly manage your credit.
1. Understand the difference between your business and personal credit score – Many people don’t realize that business and personal credit scores are not the same. To start, business credit scores are generated by companies like Dun and Bradstreet and Equifax. In most cases, you’ll need to pay to get a copy of your business credit report, while your personal credit report can be accessed for free through various websites. Another difference is that the scale for business and personal credit scores are different – while personal scores can range from 300 to 850, business credit scores usually range from 0 to 100.
2. Check your score frequently – Even if you think your credit scores are sufficient, things change. There could be an error on your personal or business credit report in the future, or your score could fluctuate depending on whether or not you make payments on-time, among other factors. Make it a consistent initiative to monitor your scores, so that you are never in the dark!
3. See how you measure up – While every business is different, it is important to know how your credit scores fare in terms of other businesses. If your score is below the national average, then it is imperative that you work to raise it. For instance, according to Value Penguin, the national average personal credit score in the U. S. is 695. By knowing the average scores, you can set goals for your business to meet.
4. Focus on meeting payment deadlines – If you’re serious about boosting your personal credit score, a good place to start is to ensure that you’re paying your bills early or on-time. If paying bills late is one of your bad habits, set up payment reminders through your banking portals, so that you’re notified before a payment is due. By making payments on-time moving forward, you’ll likely see your personal credit score increase. Same goes for your business credit score – pay outstanding balances on your business accounts on-time, too!
5. Reduce debt – It’s easier said than done, but paying off an outstanding balance can be a great way to improve your credit score. Even if it is reducing it by small amounts, it is important to make an effort to pay off debt. Once eliminated, make it a priority to stay debt-free. Your future self, and your credit scores, will thank you!