Boost Your Business Credit Score in South Africa with these 10 easy tips
Our team at i-Check Data Solutions have put together this easy to follow list of our top 10 tips that any business could use to boost your business credit score in South Africa today!
Tip 1: Be pro-active!
Take an interest in your business credit score now! With the tough economic time that South Africa is going through currently, making sure you have the cleanest possible business credit report is key to securing trade credit and loans from credit providers. What you need to realize is that a healthy credit score is a key to getting the best possible credit terms, the better your score, the more you can negotiate the repayment terms, so we have created these easy to follow tips on how to boost your business credit score.
Tip 2: Make payments on time:
Realizing that failure to make scheduled payments will seriously impact your credit score is vital to getting your credit health back on track. Delinquent payments and collections can really hurt both your personal and business credit score. Therefore if you take steps to pay your bills and debt obligations on time, the stronger your credit score will be. If you find you are struggling to make your payments on time, it’s advised that you alert your creditors and try to explain the situation, most of the time they have been in similar situations to you and will be understanding to a point. Actually making contact with them and not simply ignoring their requests for payment goes a long way in establishing your reputation as a serious and responsible business owner. It will stand you in good stead if you ever need a trade credit reference or want more good and services on credit from them in future.
Tip 3: Pay off as much debt as you can:
One of the ways your credit score is determined is based on the outstanding amounts you owe on all your accounts. All your outstanding accounts are considered with balances still owed and how much of the available credit you are using. The more you owe compared to your credit limit, the lower your score will be. What’s also very important to realize, if you have lots of credit cards and credit facilities, even if you are not using them. Your credit score will take into account that you have these as possible credit sources and therefore it will be factored in and affect your credit score.
Tip 4: Don’t overextend your credit line:
If you have a large line of credit and have almost maxed it out, slow down! Having high credit card balances compared to your credit limit increases your credit utilization and decreases your credit score.
Tip 5: Clean up your balance sheet.
If at all possible, sell assets that are not making you any money, if you can liquidate a non-performing asset and plow those funds into your debt obligations, this will decrease your debt ratio and in turn, help to improve your credit score.
Tip 6: Check your credit score at least once a year.
One of the best ways to keep on top of your credit score is to check your credit reports at least a couple time a year to make sure that the information that credit providers will use to determine your credit risk is accurate. This applies to both your business and personal credit reports, making sure you frequently check your credit health is vital to getting the best credit terms. Generally, only about ten percent of all business owners know and understand how business credit works, even less check up on their respective credit status. This is an easy way to take back control.
Tip 7: Don’t use your personal information to apply for business credit.
You must really try not to use your personal information to apply for business credit as this can increase the number of inquiries, which can negatively impact your personal credit score. Basically, each time a credit provider runs a credit check to check your score and status, this is classed as an inquiry, the more inquiries that are made can negatively affect your profile, so beware. Also, you are not building your business score if you use your personal information. A longer credit history will increase your score.
Tip 8: Formally structure and incorporate your business:
Make sure you structure your business in such a way that affords you liability protection and keeps your personal credit profile separate. The last thing you want if your company folds, is to be personally blacklisted as this will affect your ability to get a decent job and apply for any form of credit.
Tip 9: Comply with business market requirements.
Make sure that you keep on the right side of the law at all times, keep your required business and trading licenses current, and always maintain city or town ordinances. Not being in compliant with these requirements can affect your lending credibility. Most businesses will not grant money to companies that don’t comply with regulations. Its just shows irresponsibility on your part as a business owner and further raises your risk profile as a potential debtor to a credit provider.
Tip 10 Prepare a professional business plan.
Having these documents prepared shows you are serious about the project you want funds to roll out, many investors and financial institutions will appreciate and take your request for credit more seriously if you can produce a quality business plan. A credit analysis is an essential part of a professional business plan. It will analyze the capacity to repay debt, the money you have personally invested, any collateral you are offering for security, the intended purpose of the loan, and the general impression you make on a lender or investor.
Be educated. The key to boosting your business credit score is to know what you’re doing. Understand what attributes make up your credit score, and what you can do as a business owner to impact that score.