4 ways to build a creditworthy reputation.

4 ways to build a creditworthy reputation.

It’s true for both consumers and businesses: it’s much easier to get credit when you don’t need it.

So with that in mind consider the following. There are simple steps you can take before you need credit that can actually help fortify your credit worthiness. You’ll need to look like an excellent credit risk to banks, credit unions, reporting agencies, and credit card companies if you want to establish and keep your good credit.

There are four steps you can take to help you build a creditworthy reputation.

  1. Keep an eye on your own credit rating, as well as the one for your business. Many banks look at a businessperson’s credit rating first. If it is in the mid-600s or higher, you are considered a good risk. One of the best ways to keep that rating high is to have a low ratio of debt to credit on your credit cards and any credit lines you have available.

    Keep balances less than 30% of your credit limit. Inquire about the personal credit rating of investors you are considering for your business. Lenders will likely look at those too.
  2. Get credit before you are desperate. Apply for any credit, even small amounts, as soon as you get into business. Most startups need a two-year track record before a bank will lend a substantial sum. However, smaller amounts, in the form of a business credit card, credit line, or small bank loan, are entirely feasible early in the life of your business.
  3. Use your credit regularly and wisely. Your goal is to build an admirable credit history. You can accomplish that by using your credit often and paying it off quickly. In addition, even if you need to pay a fee, look into setting up a Dun & Bradstreet profile.
  4. Do business with one lender. Business and money are all about relationships. Get to know the lenders and managers at your bank. Keep them in the loop. Let them get a chance to see you in action and watch your new company grow.

Traditional Ways to Get Credit

Banks are the most prominent places to get credit. Don’t automatically apply to the closest one. Look for one with a reputation for being friendly to small businesses.

Ask other startups about which credit cards are the easiest to get. Apply for a business card as soon as possible. Don’t worry about the limit; the goal is simply to get the card. Use it often and pay off the balance in full each month.

Unique and Creative Ways To Get Credit

Don’t let a turndown from one lender stop your efforts to get credit for your business. There are many ways available. Using alternative credit sources does not harm your chances of eventually getting credit from a bank. In fact, it can improve it when they see that you handle your money well and pay back balances on time.

Here is a short list of other sources of credit:

  • Investors
  • Asset-based lenders, who base their decisions on collateral instead of credit scores
  • Peer-to-peer lending
  • Crowdfunding like Prosper, Kickstarter, and Indigogo. Of course, these are not exactly extensions of credit, but the money you get can help with bills and using it wisely shows lenders that you are a good risk.
  • Suppliers who regularly report to credit agencies

It pays to spend time working on your personal and business credit. Having strong business credit can position your business more favorably for payment terms with suppliers and vendors, and let you enjoy better interest rates and terms from banks and other lenders. Remember, once you have established good personal and business credit, be sure to monitor and safeguard it.

Learn about all the ways Liberty Bank can help small businesses.

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