How to Fix Business Credit and Improve Your Score

Business credit represents a business’s capacity to fulfill its financial obligations, distinct from an owner’s personal credit history. It impacts a company’s financial health and ability to secure capital. Understanding and proactively managing business credit can influence a company’s access to loans, lines of credit, and favorable terms with suppliers. A strong business credit profile can open doors for operational expansion and strategic investments.

Understanding Business Credit Fundamentals

Business credit functions as a separate financial identity for a company, allowing it to obtain financing and engage in transactions independently of the owner’s personal credit. While a personal guarantee may be required for some business loans, the business’s credit profile is assessed based on its own payment history and financial standing. This separation protects personal assets and establishes the business as a distinct entity.

Several factors contribute to a business credit score, reflecting the company’s financial responsibility. Consistent, timely payments to vendors, suppliers, and lenders are key. Credit utilization, the amount of credit used relative to available credit, also affects the score; lower utilization indicates less risk. Public records, such as bankruptcies, liens, or judgments, can negatively impact credit. The age of the credit history and the overall industry risk are also considered.

Major business credit reporting agencies, such as Dun & Bradstreet, Experian Business, and Equifax Business, use proprietary scoring models. Dun & Bradstreet’s PAYDEX Score (1-100) indicates payment history. Experian’s Intelliscore Plus (1-100) predicts delinquency likelihood. Equifax’s Business Credit Risk Score (101-992) assesses the probability of business failure within 12 months. Higher scores signify less risk across all models. These scores provide a snapshot of a business’s financial reliability.

Obtaining and Reviewing Your Business Credit Report

Accessing your business credit reports helps understand your company’s financial standing. Major business credit bureaus, including Dun & Bradstreet, Experian Business, and Equifax Business, provide access. Dun & Bradstreet reports can be purchased directly through their website, with packages that may include monitoring. Experian Business and Equifax Business also offer direct access, through one-time purchases or subscription services.

A business credit report contains a comprehensive overview of a company’s financial behavior and public records. It includes basic company details, such as legal name, address, and industry classification, alongside payment history from vendors and suppliers (tradelines). The report also lists public filings, such as tax liens, judgments, or bankruptcies. Details about credit inquiries are also included.

Review your business credit report to identify discrepancies or inaccuracies. Examine all listed tradelines to ensure payment statuses and amounts owed are correct. Verify company details are accurate and current, as errors can affect your credit profile. Scrutinize the public records section for satisfied liens or judgments that may still appear active, or entries not pertaining to your business. Promptly identifying these issues helps maintain an accurate credit standing.

Correcting Inaccuracies and Negative Entries

Once inaccuracies or negative entries are identified on a business credit report, take corrective action. The process for disputing inaccurate information varies among credit bureaus but involves submitting a formal dispute. For Dun & Bradstreet, disputes can be initiated through their iUpdate portal, requiring documentation like proof of payment. Experian Business and Equifax Business also provide online dispute resolution centers for submitting details and evidence.

When disputing an error, provide clear documentation that substantiates your claim. This might include canceled checks, bank statements, paid invoices, or court documents showing a lien or judgment has been satisfied. Credit bureaus have a set timeframe, usually around 30 days, to investigate and respond. Maintain a record of all correspondence and documentation related to the dispute.

For legitimate negative entries, such as a late payment or collection account, the strategy shifts to mitigating impact. If the debt is outstanding, negotiating a “pay for delete” agreement with the creditor or collection agency might be an option. While not guaranteed, some creditors may consider this, especially if the debt is older. Consistent, timely payments on current debts can gradually improve your score, as positive payment history builds a stronger credit profile. If a lien or judgment has been satisfied, ensuring court records reflect this and providing proof to the credit bureaus can help update your report.

Strategies for Building Strong Business Credit

Building strong business credit involves proactive financial management. Obtain a DUNS number from Dun & Bradstreet, often a prerequisite for a credit file. Opening dedicated business bank accounts and maintaining adequate balances demonstrates financial stability, even though these accounts do not directly report to credit bureaus. Establishing tradelines with vendors and suppliers who report payment history to business credit bureaus directly builds a positive credit profile.

When securing tradelines, prioritize vendors that report to major business credit agencies like Dun & Bradstreet, Experian Business, or Equifax Business. Net-30 accounts, allowing 30 days to pay an invoice, are common examples. Paying these invoices promptly, even ahead of schedule, enhances payment history. Consistently making all payments on time, including business loans, credit cards, and vendor accounts, is a key factor in business credit scores. Even a few days’ delay can negatively impact your score.

Manage credit utilization effectively. Keep the amount of credit used low relative to your available credit limits. For example, if your business has a $10,000 credit limit, aim to keep your outstanding balance below $3,000 (30% utilization). This demonstrates responsible credit management. Regularly monitoring credit usage across all business credit accounts helps maintain a healthy utilization ratio.

Maintain clear separation between personal and business finances. Using dedicated business bank accounts and credit cards for all company expenditures helps delineate financial responsibilities and avoids commingling funds. This separation reinforces the business’s distinct financial identity and prevents personal financial issues from directly affecting the business’s credit profile. Ongoing monitoring of your business credit reports ensures awareness of changes or potential issues.