Maintaining good finances throughout life is a very important thing to do. It allows individuals to have a good credit score, which is a three-digit number that proves how likely they are to repay any debts they may accrue during their life. A credit score has the ability to affect lives in many ways. It allows people to obtain a credit card or a loan. In recent years, it can now affect whether or not a business may offer certain products or services. When individuals apply for things such as these, lenders typically check their credit score to see if they will make payments on time and are a risk worth taking. If they decide to extend these privileges, it may be possible to negotiate a lower interest rate.
Companies also face a similar process to individuals when they are faced with the situation of credit scores. While there are different algorithms and factors that come into play when determining a business’ credit score, having a good credit rating is favorable no matter what. If a company has a good credit rating, it can provide them with good benefits. This may include avoiding prepayment for materials and services as well as place the business in a better position to negotiate with suppliers. Maintaining a good credit rating may also qualify a business for better interest rates and credit terms.
So, how does a business establish a good credit rating? There are several ways this may be achieved:
- Paying bills on time. The three main credit bureaus – Equifax, Experian, and TransUnion – calculate a credit rating. When they do this, payment history is a large factor in determining a good score. Making payments on time shows that a company is reliable.
- Watch your credit utilization. Do not max out on any business credit cards or lines of credit. Doing so may lead lenders to question whether or not your business can pay debts.
- Do not apply for credit often. If a business is wondering about their credit standing frequently, it may lead lenders to question if the business has become overextended.
- Keep all business accounts and personal accounts separate from one another. Putting the accounts together may affect a business if the individual’s personal finances are not in great standing.
Werdann DeVito LLC is an experienced Certified Public Accountant firm serving clients throughout New Jersey with all of their financial needs. If you need quality assistance with accounting, tax, or consulting services, contact Werdann DeVito LLC today.