Maximizing Your Financing Potential: Strategies to Improve Your Business Credit Score

by Kieran Daly
June 7, 2023
Maximizing Your Financing Potential: Strategies to Improve Your Business Credit Score

When it comes to running and growing your business, maintaining a good credit score is crucial. A poor credit score can keep you from securing the financing that your business may need in addition to making other aspects of your life a little more difficult. 

But what is a credit score, how is it calculated, and more importantly what can you do if you have a less-than-ideal credit score? Luckily there are steps that you can take to improve your credit score and Backd is here to help with our guide that covers the best strategies to bolster your score. 

What is a credit score and how does it work?

A credit score is a numerical representation of an individual’s creditworthiness, which is then used by financial institutions and lenders to determine the likelihood that a borrower will repay any debts on time. Credit scores are generated based on various factors that relate to the credit history and financial behavior of an individual.

Credit scores are typically calculated by credit reporting agencies like Equifax, TransUnion, and Experian. Using complex algorithms, these agencies analyze an individual's credit history, including factors such as the length of credit and payment history, credit utilization, types of credit accounts, and recent credit inquiries. This results in a numerical value that ranges from 300 to 850, with higher scores reflecting better creditworthiness. 

Each agency may differ slightly in regard to its specific calculation method, but in general, credit scores are based on a weighted combination of the following factors:

  1. Payment History: This includes the number and frequency of missed or late payments, in addition to any bankruptcies, foreclosed, or other negative marks on an individual's credit report.

  2. Credit Utilization: This is the amount of credit an individual is currently using compared to their total available credit. A higher utilization rate can result in a decrease in credit score.

  3. Length of Credit History: This considers the length of time an individual has held credit accounts and the age of their oldest account. 

  4. Types of Credit Accounts: This includes credit cards, loans, and other forms of credit. A mix of different types of credit can be viewed positively by lenders.

  5. Recent Credit Inquiries: This looks at the number of credit applications made in a short period of time, as multiple inquiries can suggest a high risk of default. 

Overall good credit scores are crucial to securing loans, credit cards, and other financial products at favorable interest rates and terms. It is important for individuals to maintain a strong credit score, but if you do have a lower score then there are steps that you can take to give your credit a boost over time. 

How to Improve your credit score?

While having a poor or low credit score may box you out from securing certain types of financing or even accessing affordable terms and rates, it isn’t the end of the world. There are several ways that business owners can improve their credit score in order to apply for business financing:

  1. Pay bills on time: Late payments can have a negative impact on your credit score. Make sure you pay your bills on time and avoid missing any payments.

  2. Monitor your credit reports: Review your credit reports regularly to ensure there are no errors or fraudulent activities that can hurt your credit score.

  3. Reduce credit utilization: Try to keep your credit utilization ratio below 30%. This means that you should use no more than 30% of your available credit.

  4. Build credit history: If you have a limited credit history, consider opening a small credit account or getting a secured credit card. This can help you establish a credit history and improve your credit score.

  5. Use a business credit card: Use a business credit card for business expenses instead of a personal credit card. This will help keep your business and personal finances separate and can help you build a credit history for your business.

  6. Work with vendors who report to credit bureaus: If you work with vendors who report to credit bureaus, make sure you pay them on time. This can help you build a positive credit history for your business.

  7. Maintain a low debt-to-income ratio: Keep your debt-to-income ratio low by paying down debts and avoiding taking on too much debt. This can help improve your credit score and make you a more attractive candidate for business financing.

It is important to note that improving your credit score takes time, so patience is key while remaining diligent in your efforts to build and maintain a strong credit history. Once you have improved your credit score it is crucial that you keep in the habit of the practices that you have taken on to improve your score, as any errors in judgment or mistakes could cause your credit score to dip again.

Apply for Backd Funding With A Credit Score of 625+

When it comes to applying for the financing that your business needs to grow, Backd is here to help. The only credit criteria that we require is a minimum score of 625 and we utilize a soft credit pull so that your credit score is never affected when trying to secure the funds that you need to grow your business.

Backd offers working capital advances ranging from $25K to $2M with terms of up to 16 months and business lines of credit ranging from $50K to $750K with terms of 6 or 12 months. Securing funds with back is quick and easy, with an application that takes just 3 minutes to complete. Our team is always ready to help however we can with funding experts always on hand to help you through the process. 

Whether you are looking to secure funds to finance your next big project or simply resolve gaps in your cash flow, apply today and you could have funds sent to your account as soon as tomorrow. Don’t wait to secure funds for your business, let Backd help you today.

What would you do with the right amount of capital?

Working Capital Advance

Easy payment structures offer amounts with fast turnaround, Simple and easy process to access working capital.

  • Flexible - no collateral required
  • $10K - $2M
  • Terms up to 16 months
  • Automatic daily or weekly, or semi-monthly payments

Business Line of Credit

Get instant access to revolving credit with unlimited terms, and the best rates for your business.

  • Draw funds anytime
  • $10K - $750K
  • Unlimited terms, incredible rates
  • Soft credit pull that doesn't affect your credit score