If you’ve been procrastinating when it comes to working on your credit, you’re probably in good company. Business owners often know what they need to get done; their challenge is finding the time to fit everything in. Fortunately there are tools and resources (many of them free) that can help you work this important task into your busy schedule.
Here are 10 tools you can use as a business owner to work on your credit:
1. Free Credit Reports
Credit reports provide the data that companies use to evaluate individuals’ and businesses’ creditworthiness. They contain account payment information along with information on debt usage, inquiries into credit reports, and other details.
When it comes to small business financing, some vendors and lenders will review a credit report when making a decision. When commercial lenders request personal information, it is usually in the form of a credit score. Either way, the information in your personal or business credit reports will help determine opportunities for financing, discounts on insurance and more.
Federal law entitles you to one free copy of your consumer credit reports each year. Visit AnnualCreditReport.com to take advantage of it. While there’s no similar requirement for business credit reports, a service like Nav will give you a summary business credit report at no charge.
2. Free Credit Scores
Information in credit reports is used to create credit scores which, in turn, often play a role in whether a small business owner gets financing and how much he or she will pay for that funding. Strong credit scores often mean lower interest rates and a greater number of funding options.
With over 150+ places you can monitor your credit scores for free, there’s no reason not to stay on top of yours. (Among those options, Nav is the only source that provides free business and personal credit score monitoring in one place.)
Missed payments on bills can wind up on credit reports, and can seriously affect credit scores. Payment history on personal credit reports fall into 30-day buckets, which means a late payment won’t usually show up on personal credit unless a payment is made at least thirty days late. Business credit is different than personal credit: commercial credit reports may include payments that are just a day late. Business credit reports use “Days Beyond Terms” or DBT to classify late payments. If a bill is due in 30 days and you pay it 32 days after the due date that bill is 2 DBT.
Setting up automatic payments for bills that may show up on your credit reports can help protect your credit from damage if you forget to pay a bill on time. For busy business owners, it can be a lifesaver. (Just make sure there is enough money in your bank account to cover the payment!)
4. Account Alerts
Staying on top of your business finances helps put you in control. Most financial institutions, including credit card issuers, will allow you to create customized alerts for important information such as:
- A payment is due or has posted
- A large purchase has been posted,
- Account balance is above or below a certain threshold
- Monitoring employee spending
If you aren’t taking advantage of account alerts, consider doing so. At a minimum, they can help you spot problems— including fraud— more quickly.
To build business credit, you need accounts that appear on your business credit reports. A business credit card can be one such reference. Another option is to open accounts with vendors or suppliers that will allow your business to purchase items on terms and then will report those payments to your business credit. (Here are three vendors that can help you build business credit.)
6. Business Credit Cards
Business credit cards may be helpful to your credit reports and scores in a couple of ways. First, many business credit card issuers do not report to personal credit and this allows you to keep business credit card purchases separate from your personal credit reports. Secondly, most business credit card issuers report payment history to commercial credit agencies, which means they can help you build business credit if you pay on time. (Here’s a list of business credit cards that can help you build business credit.)
7. Credit Builder Accounts
Nearly 40% of entrepreneurs are “credit ghosts,” meaning they have a personal credit score of 620 or below and little to no credit history. Some avoid credit by choice because they are concerned about getting into debt. Others have experienced credit setbacks and are having trouble rebuilding credit.
A credit builder account can be an easy way to build a positive credit reference. With one of these accounts you essentially “borrow” a savings account. Once you’ve paid it off, you get the savings account to use as you choose. In the meantime, it will be reported to your credit reports. Pay on time and you’ll have a new, positive credit reference.
8. Secured Credit Cards
A secured credit card can be another way to build a credit reference without the risk of debt. To open a secured credit card you must place a security deposit with the issuer. (You’ll get it back when you close your account if you handle your card properly.) Your credit limit is usually equal to your deposit, though some cards may extend a higher credit limit over time. A secured card paid on time and with low reported balances can provide a positive credit reference.
9. Small Business Consulting
Improving business cash flow can help you reduce debt and pay your bills on time. Free and low cost counseling is available from several not-for-profit agencies including:
- The National Foundation for Credit Counseling offers the Sharpen Program for Small Business Owners in partnership with TD Bank and the TD Foundation. It includes an educational program, the free MyMoneyCheckUp® (an online financial assessment tool) and a one-on-one financial review with a member agency.
- SCORE has more than 10,000 volunteer, expert business mentors in 300 chapters around the country ready to help with free small business mentoring and free or low-cost workshops.
- Small Business Development Centers (SBDCs) offer free face-to-face business consulting and low-cost training through nearly 1000 offices nationwide.
10. Financial Apps
There are a variety of financial apps that can help you keep your business finances and your credit on track, from budget tracking apps to apps that can help you and your business save money on taxes. (Again, the more money you save, the more you’ll have to ensure you make payments on time.)
And while you’re working on your credit, Nav’s app will help you track your business and personal credit along with business cash flow— for free.
Pick and choose from the tools here to find the ones that will work for you. Just make sure you implement at least one or two, so that this time next year you can find yourself in a better position when it comes to your business credit and finances.
This article was originally written on July 18, 2018 and updated on February 1, 2021.