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 a small business loan, the lender will likely need to know information about your credit history. 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 achieve good credit (both personal and business scores), so that you can responsibly manage your company’s finances.
How to Improve Your Credit Education:
1. Understand the Difference Between Business and Personal Credit Scores
Many people don’t realize that business and personal credit scores are not the same. These two types of credit measure different aspects of your financial health; your personal finances, and your business’s finances.
In comparison, there are plenty of sites that offer free credit reports that will reveal your personal credit score.
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 Scores Frequently
Even if you think your credit history is 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 you make credit card payments on-time, among other factors.
In addition to factors that are in your control, you should also check your scores to ensure you haven’t been a victim of identity theft. If either of your credit scores takes a dive, you should be sure to investigate further.
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’s 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 credit 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’s reducing it by small amounts, it is important to try to pay off debt. Once eliminated, make it a priority to stay debt-free. Your future self, and your credit scores, will thank you!
Conclusion: Make Monitoring Your Credit a Priority!
National Credit Education is a great time to focus on your business’s financial future. Even if you think that your credit scores are fine, it’s important to verify this by running credit reports frequently. In addition, make sure that you’re adopting productive habits when it comes to your finances. Whether it’s paying bills on time, reducing debt, or comparing your score to other businesses, these decisions will help you ensure that you have great credit!
Editor’s Note: This post was updated for accuracy and comprehensiveness in March 2019.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.