Bad Credit? Don’t Sell Yourself Short.
Contributed by Bizfi founder Stephen Sheinbaum.
Your store carries the perfect dresses, the latest heels and the most fashion-forward accessories. Great inventory is just one of the keys to success for any retailer. But so is something your customers will never see: A good credit score, which can lower just about every cost of doing business.
The good news is that a bad credit score, just like the perfect dress, can be altered for a better fit. As you make improvements, you can also begin to build a separate, strong credit profile for your retail business.
Fix the Errors
The first step to improving a bad credit score is to find out what your score actually is. You can get a free copy of your personal credit report every year from one of the three credit bureaus–Equifax, Experian and TransUnion. Review yours for errors and get them corrected ASAP. One in four reports typically has an error, and one in 20 has a serious error. Don’t let it be yours.
If you do find an error, you can fix it yourself by following these simple steps outlined by the Federal Trade Commission. Each of the credit bureaus has information on its website about fixing errors as well: see Equifax, Experian and TransUnion.
Put Away Extra Plastic
If you have opened a lot of store credit cards over the years to get a shopping discount, now is the time to do something more productive with them. Pay off any outstanding balances and then put the card someplace where you will not be tempted to use it or simply cut it up and throw it out. Just don’t cancel the card. It sounds counterintuitive, but part of your credit score depends on how little you use of your existing credit: You don’t want to use more than 30 percent. Cancelling a card will reduce the amount of credit available to you and could boost your usage above 30 percent.
Get a Business Credit Score
While a personal credit score reflects what you do as an individual consumer, a business credit score is only related to your business. For the health of your business–and your personal finances–it is important to establish a business credit score as soon as you can. A business credit score can affect your business’ chances of getting financing, particularly from a traditional bank or credit union. It can also affect your chances of getting credit from your suppliers. If your business credit score is bad, you might not be able to get the inventory you need for your business at affordable terms.
To establish a new business credit score, get a free D-U-N-S number from Dun & Bradstreet. That’s a unique 9-digit number for your business and it enables D&B to begin gathering what will hopefully be a positive credit profile. You’ll also need a D-U-N-S number if you’re going to register as a federal government contractor or if you want to secure a loan guaranteed by the U.S. Small Business Administration.
Fix Your Business Credit Score
Your business score is calculated from data collected on your business. If a supplier has extended credit to you and you didn’t repay it on time, it can damage your score. All of the business credit agencies get reports about your business from the companies you work with. If they’re not happy with you, the agencies will know, so make a pledge to pay your suppliers promptly and catch up on old bills. Then manage whatever credit is extended to you wisely. If you get a line of credit, draw it down responsibly and pay it back as required.
As you are improving your bad credit score, know that it doesn’t have to limit the growth of your business. Small businesses now have many alternative finance options now to fit their needs, even if their credit score doesn’t fit as well as it should.
Stephen Sheinbaum is the founder of Bizfi, the premier FinTech company combining aggregation, funding and a participation marketplace on a single platform for small businesses. Founded in 2005, Bizfi and its family of companies have provided more than $1.7 billion in financing to more than 30,000 small businesses in a wide variety of industries across the United States. Mr. Sheinbaum has authored several articles that have appeared in a variety of national publications, he has spoken on numerous industry panels, and he was most recently featured on CNBC and Bloomberg where he discussed the current state of lending to small businesses.