Credit score for business: 5 key strategies to boost your credit health

A robust business credit score is important for securing favorable financing terms and easy business loans. It also helps in sustaining good financial health.

Whether a company needs money for infrastructure, equipment, working capital etc., a good business credit score will always go well for availing easy business loans.

Here are five key strategies to manage a strong business credit profile:

1. Ensure timely payments
   Paying your company’s past bills, loans, and supplier invoices on time is very important. Delayed or missed payments can significantly hamper your credit score. Use reminders or automate payments to maintain a positive payment history. As the history of payments is very important for any business credit profiling.
2. Maintain a low credit utilization ratio
   Try to use no more than 25-30% of your available credit limit. For example, if your credit line is ₹10 lakh, try to utilize up to ₹3 lakh only. Exceeding this ratio might negatively impact the credit score of your business. This is something very important to always keep in mind.
3. Manage existing debt prudently
   Before acquiring new loans, ensure that existing debts are well-managed and repaid timely. For a company a debt-to-equity ratio should be less than one. Therefore, accumulating multiple loans without proper repayment will lower your business credit score and signal financial instability to lenders. It is simple, lower the debt the better it is.
4. Retain long-standing credit accounts
   Keeping older credit accounts open, even if rarely used, can boost a company’s business credit score. A lengthy credit history provides lenders with a clear picture into your long term financial behavior, repayment history, trustworthiness and stability.
5. Regularly review your credit report
   It is important to regularly examine your company's business credit report to identify and improve any shortfalls or negative entries. Addressing these issues promptly will prevent potential damage to your credit score.

Therefore, by diligently implementing these practices, businesses can maintain a healthy credit score, facilitating seamless access to financing and favorable terms.