So you have managed to establish a Business Credit Profile but your Business Credit Score is not moving UP as fast as you would like… so… what do you do?
Would you believe that PAYING YOUR BILLS ON TIME is the number one thing that you can do to raise your Business Credit Score?
Now… when I say ‘PAY-YOUR-BILLS-ON-TIME’, by no means am I trying to be flippant here, not even close, I take Business Credit way to seriously.
When I say ‘ON-TIME’, I do not mean ‘one day late’, or ‘one week late’, not even ‘one hour late’.
I mean ‘ON THE DATE YOUR BILL IS DUE’, not a second late.
When it comes to building business credit, this is where many Small Business Owners (SBOs) get tripped up, because many SBOs believe that Business Credit works just like Personal Credit, and if you happen to be an SBO that believes this, then you could very well be seeing your Business Credit Score drop like a rock.
You see, when it comes to our Personal Credit or our Consumer Credit, there are several factors that impact our PERSONAL CREDIT SCORES, and ON-TIME-PAYMENTS is the most important factor of them all, however, as a personal consumer of credit, the creditor does not consider a ‘payment’ as being ‘late’ on a Personal Credit Profile, until after-day-30.
In other words, Creditors do not report our LATE PAYMENTS to the Credit Reporting Agencies (CRAs) until after we are 30 days late.
So as long as we make our payment to the creditor BEFORE the payment is over 30 days late, we can avoid a LATE PAYMENT REMARK on our credit report.
That’s great for us as consumers, as ‘technically’, we receive sort of a 30-day ‘grace period’ BEFORE our Personal Credit Reports get dinged with a negative remark.
However, when it comes to Business Credit, as an SBO, you don’t get such ‘grace’.
In fact, if you are even so much as ONE-DAY-LATE, your vendor, or your supplier, or whomever has extended you Business Credit, has the ability to ding your Business Credit Profile that same day, which in turn, drops your Business Credit Score that much faster.
Now even though there are a few other factors that matter when it comes down to calculating your Business Credit Score, for the most part, your ON-TIME-PAYMENTS are what matter the most, and ON-TIME-PAYMENTS have a tremendous impact on your Business Credit Score.
So, if you happen to be an SBO with the belief that Business Credit works just like Personal Credit, and therefore, you have a ‘30 day grace period’ before a ‘Late-Payment’ gets reported to your Business Credit Profile, well, you may unknowingly be causing your Business Credit Profile a lot of harm, and as a result, may be causing your Business Credit Score to keep dropping like a rock.
So YES… PAY-YOUR-BILLS-ON-TIME can have a quick and massive impact on your Business Credit Score and it could be faster than you think.
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