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Jul 26, 2022
2 min read
Last update: Apr 15, 2024

Avoid Making Common Mistakes That Can Hurt Your Business Credit Score

When working to build up your business credit, it’s important to make smart financial decisions. Here are some of the worst mistakes you can make when establishing business credit and our tips for how to avoid them.

Not Monitoring Your Credit Report

As a business owner, it’s crucial to pay close attention to your business credit report. If you ignore your credit report, you could miss errors such as outdated information or discrepancies that could drastically lower your score. Something seemingly small like a payment that has been incorrectly reported as late could have a big impact on your credit rating. Be sure to continually monitoring your business credit score for accuracy. If a mistake does occur, staying on top of things will help you quickly dispute the issue. Plus, you’ll see any negative information that shows up on your report and gain insight into what needs to be remedied in order to improve your score.

Paying Bills with Your Personal Finances

As we mentioned in a previous blog post, it’s so important to keep your personal and business finances separate. Business purchases made on personal credit cards don’t build business credit, so you won’t be establishing any credit history that way. You also risk lowering your personal credit score in the event that things go south for your business. Instead, keep bank accounts and credit cards separate so you can build business credit and avoid personal liability for your business debts.

Making Late Payments

Paying your bills late and having unpaid outstanding bills can really damage your credit rating and lower your credit limit. Furthermore, it signals that your company lacks cash flow and may not be financially responsible—which could be a red flag to lenders or potential investors. Instead, be sure to establish good payment habits now to help you build a solid payment history. Paying your bills early can drastically improve your score since credit reporting agencies give a higher score to companies who make early payments.

If your company struggles to pay invoices on time, a business line of credit or invoice factoring can keep your business running smoothly without any gaps in cash flow. It’s perfect for business owners who want the peace of mind of knowing they have access to funds at all times. Of course keep in mind invoice financing best practices to boost your company financial conditions to the fullest.

Maxing Out Credit Cards

Carrying high balances or maxing out your business credit cards can harm your credit score by negatively impacting your debt-to-credit ratio. What many business owners aren’t aware of is that even if you pay your outstanding balances on time, credit reporting agencies observe the high utilization ratio as a risk. Instead, refrain from overspending and aim to keep your credit card utilization at 30% of your total credit limit. This is the ideal number recommended by most credit reporting agencies.

Need Help Building Your Business Credit?

In addition to avoiding the mistakes, you can help build your business’s credit by opening a line of credit from SBG Funding. Our business lines of credit help establish a payment history while building their credit score and maintaining constant access to capital. Call (844) 284–2725 or apply today!

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