5 Common Mistakes That Can Hurt Your Business Credit Report

Your business’s financial future starts with its credit score. A strong business credit score can unlock opportunities like securing loans, hiring more employees, or financing essential equipment your business needs to reach a new level. Regularly checking your business credit report helps you avoid potential issues, build trust with lenders, and strengthen your company’s financial reputation.

By avoiding common business credit report mistakes, you can boost your chances of loan approval, drive business growth, and better understand your financial health.

5 Business Credit Report Mistakes to Avoid

1.     Not Monitoring Your Business Credit Report

Three main business credit bureaus—Experian, Equifax, and Dun & Bradstreet—collect your essential business data and put it into a business credit report that you can check. It’s essential to routinely review your business credit report to protect it. Here are the biggest issues that unmonitored reports can create:

• You can’t ensure accuracy by catching disputable errors.
• You have less protection against identity theft because you can’t see or investigate unauthorized inquiries.
• You’re less informed about potential partners, curious investors, and lenders who look into your business.

Ignoring your account and leaving it unmonitored could lead to missing disputable errors that could negatively impact your score or even be signs of fraud.

2.     Misunderstanding the 5 Cs of Credit Scoring

Misunderstanding the factors that directly impact your business credit score may cause you to focus on the wrong areas for improvement, possibly costing you loan funds when you need them most.

There is no standard model for scoring business credit, but these five crucial factors can directly affect your credit scores and report standing. Do your best to get familiar with them and how they apply to your business:

• Creditworthiness: how likely you are to pay back debts on time based on payment history and other factors
• Credit capacity: the amount of resources and cash you possess to pay back debt
• Capital: the money, stocks, or other assets you have invested that demonstrate your commitment to the business
• Collateral: the buildings, machines, or inventory that your business owns
• Conditions: how your business is growing and competing in its industry

With more awareness of the five Cs, you can better spot where to channel your efforts. You can also check if you possess the most attractive Cs for a particular loan before applying—or if you need to strengthen your profile beforehand to avoid rejection.

3.     Making Late Payments

In addition to signaling poor credit management, late payments can lower your business’s credit score. To avoid compromising your reputation and credit health, try making consistent minimum payments on or earlier than your loan terms require. Some credit models like Paydex® even reward early payments, and suppliers may see early payments more favorably.

4.     Closing Business Credit Card Accounts

Account closures often negatively impact credit scores. And while credit bureaus like Experian strive to keep business credit reports as current as possible, card closures may temporarily lower your score for an extended period.

Even if you have inactive credit cards, avoid closing them all at the same time. If paying down your balance is the goal, consider calling your credit card company to adjust your due dates or explore balance transfer card options.

5.     Keeping a High Credit Utilization on Business and Personal Credit Cards

Credit utilization is the amount of available credit that your business uses. For example, if your business credit card has a $10,000 credit limit and you have an $8,000 balance on it, your credit utilization is 80%. A high credit utilization rate (CUR) often translates to higher debt levels on a business credit report, signaling greater financial risk.

Dropping the credit utilization below 50% would positively impact your score and may get you better results when applying for more business credit. If you already have business credit, keep your utilization as low as possible. The lower your CUR, the more attractive you’ll appear to lenders.

Keep Your Business Credit in Check

To check your business credit, visit any of the main bureau websites. Use your company’s name, state, and country to locate your business listing. Once you find your listing, order your business credit report directly from your bureau website of choice.

Carefully review the report to ensure all information is accurate. Immediately initiate a dispute if you find errors, suspicious activity, or unverified entries.

Your business credit report constantly evolves, so it’s essential to stay on top of it. After your initial review, make a habit of checking your reports regularly. Taking these proactive steps to keep your business credit report strong can expand growth opportunities and protect your company’s financial health.

Contact Information:
Name: Sonakshi Murze
Email: [email protected]
Job Title: Manager