How to improve your credit score for better financing options

- March 21, 2024 3 MIN READ


As a small business owner, your credit score is important and is so much more than just a number on a report. A good credit score can help you unlock financial opportunities, achieve goals and grow your business, writes Angus Sedgwick, CEO of OptiPay.

A higher credit score typically translates to lower interest rates on personal loans, mortgages and credit cards, as financial institutions usually rely on this score to gauge the risk associated with lending money.

A number of tools can empower you to proactively manage your credit health, and technology plays a big part in this.

5 ways to improve your credit score for financial stability

1. Regularly check your credit report

Do you currently know what your credit score is? Financial institutions have simplified the process of credit monitoring, so it’s now easy to access credit reports on their platforms. You might even find your credit score is outlined on your monthly statements. By being across your report, you can promptly identify and rectify any errors or discrepancies that might negatively impact your credit score. Monitoring for changes is also important to help you identify behaviours that might be affecting your score so you can adjust those habits to increase your overall credit health.

2. Utilise technology for timely payments

With the technology we have available, there’s really no excuse for missing a payment. Direct debit, automated bill payments and reminder features in banking apps or complementary financing software can reduce the risk of missed due dates and ensure punctual payments. Paying your bills on time leads to a better credit score and also provides clarity on outgoings which allows business owners to better budget and prepare for expenses.

3. Credit management tools

Consider implementing financial budgeting apps to monitor and manage your credit utilisation. These help to provide accurate insights into your spending patterns, which allows you to reduce costs or spread expenses across different payment platforms. This can have a positive impact on finances and ensure you’re actively managing your credit health.

4. Diversify credit types

If you have all your credit facilities in one category, it might be worth looking at other providers. There are  multiple credit options available tailored to different needs and preferences, and it can be of benefit to diversify the ones you use. Traditionally, businesses were limited to acquiring credit through standard financial institutions like banks or credit unions; however, now there are new options like peer-to-peer lending platforms, credit cards and alternate fintech providers. A credit mix diversifies your credit portfolio and mitigates risk. However, it’s not in your interest to have multiple lines of credit, also known as “debt stacking”, so make sure you realise the implications of this.

5. Patience pays off

Improving your credit score requires dedication and consistency over a long period of time. Business owners can improve their credit health by closely monitoring cash flow and implementing strategies to optimise this. Whilst technology can help with offering tools and resources the commitment needs to come from the management team.

Building a strong credit score is worth doing as it allows your business access to loans and other cash flow financing with more favourable terms and higher borrowing limits. It also allows you to build better trust with suppliers and opens doors to better financial opportunities. Businesses with good credit scores are more likely to negotiate favourable terms with contracts and agreements and are more attractive to investors. Having better financing options is key to supporting business expansion and operational growth and steering you on the right path for success.

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