Get Your Credit in Tip-Top Shape
Even just understanding what's going on with your credit score can give you a leg up.
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While credit card companies were flexible and accommodating during the peak of the pandemic, one thing is for certain: Most credit scores suffered a blow as the result of decreased earnings. As many businesses and entrepreneurs are scrambling for more financial wiggle room to rebound this year, it's time to look to business credit as a way to access more financial leverage. The average business credit limit is usually around triple one's personal credit limit, and many credit cards provide point benefits for restaurants, travel and other savings. So, it's a win-win to assess your current credit, start the repair process and take advantage of the most consumer-centric business credit cards.
Related: Here's How to Protect Your Credit Score in 2021
Even just understanding what's going on with your credit score can give you a leg up. The Nav American Dream Gap Survey reported that "small business owners who understand their business credit scores are 41% more likely to be approved when they apply for a bank loan." The extent to which you can take advantage of business credit and the perks associated with these in-demand credit cards comes down to your credit score.
Whether your credit score is in desperate need of resuscitation or could just benefit from some TLC, it's recommended to follow these tips to access as much business credit as you need. 2021, as a rebound year, requires freedom, and the more business credit you can access, the more freedom you'll feel in your business and personal finance.
Assess your current standing
First, it's important to take stock of how the pandemic affected your credit score. You may have stayed on top of all of your bills and expenses, but suffered a drop in credit score because of decisions made by your credit card company. According to ABC11, some consumers saw their credit score take a knock because their credit card companies halved their credit limits to protect themselves from increased liability.
Your credit score also may have surprisingly risen over the pandemic. Mass panic made security a top priority, which means many cut back on spending dramatically, in fear of losing their job or stable income. If your credit score is at an all-time high, now is a good time to think through how you can sustain this and take advantage of it moving forward.
You can't fully assess your current standing without evaluating the context. Credit report companies have different meters of what is a "good" business credit score. According to CardFellow, a 90+ score is "good" for Equifax, 80+ is "good" for Dun & Bradstreet, 76+ is "good" for Experian, and a score of 140+ is preferred for FICO SBSS. Because of these differing marks, consider digging into what credit report services your ideal credit card company uses. Note: It's usually FICO, and it's best to aim high anyway.
Related: 3 Tips for Young Entrepreneurs on the Power of Credit
Evaluate your credit report
Beyond assessing your current standing, it's important to dig deeper and be investigative about your credit report. Arnita Johnson-Hall is the founder of Luxurious Credit and a consumer credit advocate. She shared a chilling statistic. "Seventy-nine percent of all credit reports actually contain errors," she explained to me. "And these aren't just typos. Twenty-five percent of those errors can cause a consumer to be denied credit."
In other words, your credit report might not be as factually accurate as you assume it to be. And, since credit card companies or lenders run your credit before approving you, that means they may be looking at false information, and denying you credit or severely reducing your credit limit as a result.
Johnson-Hall urges anyone who hasn't done so already to print their credit report and go through every detail thoroughly, verifying that everything the report says is accurate. "It's likely that there are one or two mistakes that can be easily fixed by contacting the credit report company," she explained. "Make sure to do this before applying for credit."
Tips for repairing your credit
Beyond evaluating your current condition and ensuring everything is up to date, consider what you can do financially to pay back all lenders. If all debt has already been paid, it's a simple matter of your habits. Pay bills immediately, and be cognizant of how much of your credit line you are currently using.
Related: These Credit Repair Specialists Tell 3 Steps to Repair Your Credit Score
If you have a tremendous amount of debt that is driving your credit score down, consider consolidating your debt. This will help you stay on top of payments by reducing the interest on top of the credit card debt. Many fall into a cycle of only being able to pay the interest and a sliver of the debt, which keeps them stuck, and keeps their credit score sinking.
Luckily, because of last year and its continued impacts, there is more forgiveness and leeway than usual. Take advantage of this not by continuing to push off payments, but by using quarter one of this year to revive your credit score and take advantage of the business credit options out there. This is a repair year for everyone, and it starts with your credit score.