As a business owner, you are aware that establishing or repairing your business credit is critical. For many small businesses, the first step is being personally liable for lines of credit, but as the business grows, an advantage of business credit is that the business can stand on its own creditworthiness when applying for financing. This is what many small business owners strive for, but if you need to repair bad business credit, it can be hard to do.
If you are running a business in Southeast Wisconsin, Nolan Accounting can help you get back on track. We can help you manage your finances so your business credit thrives, as well as manage your daily accounting and bookkeeping tasks, payroll, and help you with your tax prep needs.
Unfortunately, many people are unaware of the similarities and differences between personal credit and business credit. In some ways, the two are similar, but there are also some major differences that are important to understand- especially if you want to repair blemishes on your business credit report.
In this article, we’ll offer you 5 tips to repair bad business credit.
5 Tips for Repairing Bad Business Credit
If you have bad business credit, it’s not the end of the world. There are some things you can do to fix it.
Send a debt validation letter
There are 3 credit agencies that report/repair bad business credit:
A debt validation letter is a letter you write to the creditor to ask them to verify the delinquency. It is similar to a credit inquiry dispute letter.
You may also send a similar request to the credit agencies. It’s important to note that some trade vendors don’t report to credit agencies at all, so this could be a simple but impactful interaction.
Look for notices from credit agencies
Business credit agencies often send out a notice if there’s an impending derogatory remark on your report. This can help business owners who may be unaware of pending delinquency. However, don’t rely on these- they are not guaranteed.
Request a paper deletion when a business debt is settled
When you have delinquencies on your personal credit report, you may make a settlement offer for less than the amount of the debt. Unfortunately, that transaction, known as a paper deletion, will not show the balance as paid in full.
It’s different for business credit. Even if the debt is settled for less than you owe, you can have it removed from your business credit report. The credit agencies nor the vendors want to hold your credit hostage- they just want to be paid.
Keep total business credit usage under 30%
According to the experts, your personal and business credit usage should be under 30% of your total credit. Having the ability to use the credit and refraining from maxing it out can be critical for establishing or reestablishing credit.
Emphasize/update positive information on your business credit report
Unlike personal credit, there is very little information reported on your business credit report. Your personal credit includes things like mortgage loans, educational debt, credit card debt, and more. On the other hand, your business credit only lists the vendors that extend credit, which can be quite flexible and likely to change.
When you pay down a line of credit, you should report it to each of the credit agencies to make sure that it’s updated with positive information. This positive payment history can help reduce the damage from the blemishes that are on there.
Conclusion
As a business owner, it’s important to pay attention to your business credit. If you have some problems on your report, you need to take steps to repair your bad business credit- these 5 tips can help. If your business is located in Southeast Wisconsin, Nolan Accounting can help you get back on track so you can grow. We offer a variety of services from day to day accounting and bookkeeping, payroll services, and tax prep.