Protect Your Credit Profile
In addition to keeping your payments current, debt down, and revenues growing (the best ways to assure a strong credit profile), the most effective methods of protecting your credit are to regularly monitor what’s on your report quarterly and identify any information you think is incorrect. Notify creditors if you find any errors or discrepancies. You should also check your credit report for the three months prior to applying for a loan. Gradually close any accounts you’re not using, but not all at once. If too many are closed at one time, creditors may view it as a sign of financial difficulty. Close only one or two dormant accounts per month.
Consider a Credit Profile a Necessity
You should make sure you have a business credit profile if:
- You are planning to obtain a business loan
- You need to purchase or lease equipment
- Your cash flow is tight
- You want to ensure you are getting a fair deal from lenders compared to your competition
- You want to pay net 30 days instead of COD (cash on delivery)
- You are paying interest at prime plus 1 or higher
Make Sure Your Information Is Correct and Complete
Depending on the size and type of your business, your business credit factors may be assigned numerical scores, which allow an application to be processed automatically, without the direct involvement of the credit manager. Given the relative size of small business loans, many financial institutions that process large numbers of applications typically use automated decision-making processes. Some of the most popular decisioning engines in use today cut-off scores to accept or decline the lion’s share of applications, relying on manual evaluation only in those cases that are inconclusive.