Having good business credit is crucial for any company’s success. Unfortunately, it’s not uncommon for businesses to experience circ*mstances that damage their credit – an unexpected loss of a major client, a rough quarter, simply forgetting to pay a bill on time. Whatever the reason, rebuilding damaged business credit is possible with some strategic effort.
As a credit repair expert with over 10 years of experience helping businesses restore their credit, I’ve seen what works to get companies back on positive financial footing. Here is my advice for any business owner looking to rebuild their credit score after a setback.
Review Your Credit Reports and Assess the Damage
The first step is pulling your business credit reports from the main reporting agencies – Experian, Equifax, and Dun & Bradstreet. Look for any late payments, collections, liens, judgments or other negative information dragging down your score. Also make note of any inaccurate or erroneous information that shouldn’t actually be reporting.
Getting the full picture allows you to create a tailored game plan to start offsetting the bad marks and boosting your score through positive payment history and new credit lines. Services like Nav offer free business credit monitoring and reports from major bureaus.
Contact Creditors About Errors or Negotiations
If you spot any incorrect late payments or other false information while reviewing your reports, reach out to those creditors immediately to dispute the errors. Supply them documentation proving the inaccuracy – this can get negative marks removed relatively quickly.
You can also try negotiating with creditors, offering to immediately pay off a late bill in exchange for deleting the delinquency from your credit history. Granted, success depends on the creditor but it’s worth exploring, especially for major missed payments dragging you down.
Pay All Bills Early or On-Time
Going forward, you need to establish a track record of perfect on-time payments with all your creditors and vendors. Set calendar reminders for every bill’s due date. Automate payments whenever possible. Always pay at least the minimum owed a few days before the actual deadline.
The more positive payment history you can build up month after month, the more it counterbalances past missed payments, driving up your score over time.
Only Use Business Credit Cards Responsibly
Business credit cards can be useful financial tools but also dangerous for companies with past credit issues. Only open new cards if you’re absolutely certain you can pay off balances in full every month. Maxing out cards or missing payments creates new dings.
Use business cards strategically just to boost your credit mix, not access more debt. Charge small purchases every month, pay off balances promptly. Over time, this builds additional positive history.
Don’t Close Unused Credit Lines
While opening new credit lines helps in the long-run, resist closing older accounts even if you aren’t using them anymore. Length of credit history also factors into your score – keeping accounts open preserves that record.
Additionally, closing accounts lowers your total available credit which negatively impacts credit utilization ratios. As long as there aren’t annual fees, keep infrequently used cards open.
Apply for New Store Credit Lines
Opening new revolving credit lines – bank loans or store credit accounts – boosts your total available credit and adds positive history as you make on-time payments. This helps counterbalance past missed payments.
Good options to consider include store cards at places you frequent for business supplies and expenses or credit lines with business-friendly issuers like Kabbage. Only apply for what you genuinely need and can manage at the moment. Too many new accounts at once seems risky to lenders.
Add Yourself as an Authorized User
If your personal credit score is in good standing, consider adding your business as an authorized user on one of your longest-open personal credit cards. This lets your business benefit from the positive history and credit mix of that account.
However, if your personal credit needs work as well, focus efforts there first. Improving personal scores has a halo effect, making lenders more willing to extend business credit too.
Dispute Inaccurate Vendor Payment Data
Unlike personal credit reports from the big 3 agencies, business credit reports from vendors like Dun & Bradstreet often contain more errors in payment data. Dispute and correct any inaccuracies.
Demonstrating on-time payments with vendors and suppliers is vital for your small business credit profile. Bad data drags down those vendor credit scores. Proactively checking and challenging incorrect records prevents this.
Leverage Guarantor Services
If your business credit is too damaged to qualify for essential financing or corporate cards at the moment, guarantor services like Brex could help bridge the gap. These companies extend credit to small businesses backed by the founder’s personal credit record rather than the business’ past payment history.
Over time as your business credit improves, you can graduate to qualifying for traditional financing options without needing a personal guarantee. But guarantor services are useful interim tools while rebuilding business credit.
Monitor Progress Regularly
Check your business credit reports and scores from the major bureaus every 2-3 months to monitor your progress as you work to execute the steps above. It takes diligence and patience to rebuild credit so tracking your standing ensures your efforts are paying off.
Expect a slow uphill climb – significantly damaged scores take years to fully restore. But staying focused on responsible financial management makes hitting credit goals achievable long-term. With some strategic effort and persistence, rebuilding your business credit is very possible.
If you have any other questions on restoring your company’s credit or need personalized advice, don’t hesitate to reach out to my credit repair firm for a free consultation. Best of luck with your credit rebuilding journey!
