How to repair trade credit

How to repair trade credit

Dear Business Banter,

A customer paid late (without letting me know first!) And as a result, I was late on a few payments. Now my business credit rating has dropped. Do you have any advice on how I can get it back? The faster the better! – Albert

Dear Albert,

As wonderful as owning a small business is, it can also be stressful. If you don’t get paid on a timely basis, it can put you in a position to fall behind on your own credit accounts. Not only is this frustrating, it can also negatively impact your business credit reports and scores.

Have a business question for Erica? Send him a message on the Ask Bankrate Experts page.

How to Fix Your Business Credit Score

Credit reports and business scores are more complicated than their consumer cousins, so take the time to understand how they work. The most common are produced by Dun & Bradstreet, Equifax and Experian.

The number of years you have been in business, the number of credit accounts (credit cards, loans, lines of credit) that you have applied for in the past nine months, the number of new credit accounts you have, the amount of your debt you carry (especially with regards to lines of credit) and any evidence of collection and lien appears on your business credit reports and are key influencing factors in scoring.

However, the way you keep your bills becomes very important. “Payment history is one of the most important factors in calculating your company’s credit score, so missing a few payments will tend to have a bigger negative effect,” says Brian Bond, senior vice president of Experian Business Information Services products, marketing and strategy.

Not what you want to hear, right? Do not worry. You can recover from the credit score and reputation damage caused by some late payments by taking action.

Create a financial float

It seems like you were depending on this client for your income so that you could manage your own accounts. It’s a dangerous place, so strengthen your foundation.

Arm yourself with savings you can harness when times get tough. Business credit creation products are also essential. Think about loan products that can be useful in situations like these. A business line of credit will allow you to cover expenses, including other debt repayments, and pay them back over time.

Unlike a loan, you won’t pay any interest on it unless you use the funds. And make sure you have enough credit available with the right business credit cards. Ideally, you want at least a few great credit cards that are spinning and available to you.

Communicate with the creditors in question

Call each delinquent debtor and explain the reason for the late payments and what you are doing to compensate for this possibility in the future. It’s not about making excuses, it’s about letting them know what happened and that you are doing what it takes to make sure it doesn’t happen again.

Know that discussing the matter will not change the past, but this communication can set the stage for a good relationship in the future.

Check your company’s credit report

As with a consumer credit report, keeping up with your business reports is your responsibility, so check them frequently. They should show as much compelling data as possible, as this is what is used to calculate your credit scores.

Pay close attention to all of the items in the negative category so you can identify errors or signs of business fraud or identity theft. Consider using a free tool like Experian Business Credit Score Planner, which is designed to help business owners improve their credit scores.

Pay the …

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