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4 Things People Get Wrong About Business Credit

7 February 2020 No Comment

It’s really surprising to see how many business owners have no idea about how business credit works. But when you do, you can not only work on establishing and improving it but prevent the mistakes that could hurt it without you realizing. The problem is that there are too many myths and preconceived ideas about business credit, which can end up severely limiting business owners in their options. Let’s take a look at some of the things people get terribly wrong about business credit.

Paying Vendors and Creditors Automatically Improves My Credit

One of the best ways to build credit is to have lines open with vendors and suppliers. However, that doesn’t mean that every transaction will be automatically reported. Only certain vendors report to bureaus, so make sure that you know before you open a credit line so you don’t end up wasting your time.

Personal and Business Credit are Calculated the Same Way

This couldn’t be farther from the truth. Business and personal credit are very different from one another. For one, there is no set credit score for businesses like there is with personal credit. A lot of different factors are also looked at when establishing business creditworthiness that aren’t with personal credit. That includes things like information about your business’s activity on the internet, filings, and information from data furnishers.

If you really want to know how business credit is calculated, and what you can do to fix it, we strongly suggest you check out this page from Advanced Point Cap. You cannot go in blindly without understanding what truly impacts your credit. Only when you understand what business credit is and isn’t will you be able to work on building it.

Paying on Time Builds Credit

Sure, having a good payment history with a reporting vendor is a great way to improve your credit. But, while paying on the due date is great, you could get even greater benefits if you pay early. This might be a challenge for certain businesses, but if you can manage to pay bills early, this will show on your reports.

Business Credit is Not Really a Necessity

While you have a lot of options as a business owner and can offer personal guarantees, that doesn’t mean that vendors or creditors won’t be looking at your credit score. And since business credit isn’t regulated like personal credit, they are under no obligation to tell you that they looked it up.

There are some cases when a supplier might decide to cancel your account after seeing your credit score. Potential partners may also see your bad credit as a warning sign. So, don’t make the mistake of thinking it’s irrelevant, and work on building a solid history.

Now that you know a bit more about business credit, you can take the steps necessary to get on the right path. Make sure that you maintain a good relationship with your suppliers, and understand what really impacts your credit so you can make the right choices.

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