Tips to Build Your Business Credit Score

Almost everyone is aware of personal credit cards and credit scores, nowadays, but have you heard of a business credit card? Just like personal credit cards that are supposed to be used for personal use, business credit cards are also issued by all major banks and card issuers. These cards are exclusively for business expenses and are issued to registered corporates only. But in order to get these cards and other types of business loans, a business credit score is required. If you also want to establish your business credit score, you might be looking for some ways to do the same. In this article, we will help you out with some tips and tricks to establish your business credit score and maintain it:

Important Tips To Establish Business Credit

The following are some of the most important steps to take in order to build your business credit score, which will help you get approved for bigger business loans in the future:

Register Your Business and Get a PAN Card

Before you take any step in establishing your business credit history, you need to ensure that you have registered your business. Just like personal credit scores and reports that are made using individual PAN numbers, business credit reports are also prepared on the basis of the PAN number of that particular business. So, the first thing you need to do before building your business credit is to register your business and get a separate PAN Card for it.

Open a Business Bank Account

In order to manage your business finances better, it is important to open a separate bank account for your business expenses. It is not a good idea to use the same bank account for your personal as well as business requirements. Opening a business account will not only help you manage your corporate expenses better, but you will also be able to build a good relationship with the bank. Once you build a good financial relationship with your bank by opening a business account, it will be easier for you to get approved for a business credit card/business loan.

Get Credit Cards/Loans From Genuine Banks/Issuers

There are so many lenders and card issuers in the financial market these days, but in order to build your business credit score, you should always prefer getting a card from the top issuers/banks. Small private institutions also offer business credit/loans, but these might not help you build a credit score for your business. All the major card issuers like HDFC Bank, ICICI Bank, SBI Card, etc, offer business cards. However, the features and eligibility criteria of these cards can be different. It might be difficult to get approved for a corporate card initially, but you can get one business card after you build a good relationship with the issuer. Using business credit cards is one of the best ways to build your business credit.

Avoid Late Payments

No matter if you are using a personal credit card or a business card, the important thing to keep in mind is to make the bill payments on time. Credit Score comprises five different components and your payment behavior is the most important one. Once you get a business credit card or loan, make sure that you make all the bill payments on time. Delayed or missed payments can have a very bad impact on your business credit score, which will further create problems in your future credit applications.

Keep Credit Utilization in Mind

If you are not very new to the world of credit cards, you would have surely heard of the credit utilization ratio and how important the role it plays in building your credit score. The credit utilization ratio of a business refers to the ratio of the used credit limit to the total available credit limit of a particular business. Credit utilization makes a major part of your credit score and in order to maintain a good score, it is advisable not to exceed 30% of your credit limit. Therefore, while using your business credit card also, you should keep the credit utilization ratio always in mind.

Bottom Line

Along with the payment history and credit utilization ratio, there are lots of other factors that affect your business credit score. These include the number of hard inquiries on your business credit profile, the average age of your business credit/loan accounts, etc. All these factors need to be kept in mind while using a business credit card, but again, the most important thing is to pay your credit card bills on time. Building your business credit score is an important thing to do as it might help you in several situations when you need a loan/credit for your business expenses. We hope that the above tips would help you establish your business credit. If you have any further doubts, make sure to let us know in the comment section below!