The Smarter Path to Financial Returns

The PSA Blog

Helpful news, tips and business advice for small to medium business owners about how to maximise profit, minimise waste and grow and protect your business.

PSA shares 3 practical tips to improve your credit score for your business.

Poor Credit History? Here are 3 Practical Tips to Improve your Credit Score

A solid credit history is a valuable asset for any business owner. It not only affects your ability to secure financing but also influences the terms and interest rates offered by lenders. Whether you’re a small business owner or a seasoned entrepreneur, taking steps to improve your credit history can open doors to better financing options and help your business thrive.

As a private lender, we specialise in helping businesses that struggle to access financing through traditional lenders to get the funds they need to get back on track, but we also arm borrowers with the skills and advice they need so they don’t have to resort to private lending in future.

A key aspect of being able to lend through a traditional bank is having a good credit history. But, if you’ve struggled with growing debts or defaulted payments in the past, your credit history may be a little worse for wear. But that doesn’t mean it can’t be returned to health.

Here are 3 practical tips to improve your credit score:

1. Ask the Experts!

The first step to improving your credit history is to establish a strong foundation in managing your business finances. Lenders assess your financial responsibility based on how well you handle your company’s money. Of course, this is a lot easier said than done. The biggest factor in getting your finances in order is seeking professional advice. As cliché as it sounds, without a plan, you plan to fail, and this is 100% true when it comes to ANY facet of business.

An experienced accountant or financial planner can help you with:

  • Creating accurate and accessible financial records
  • Setting up accounting software for easier invoicing and payments
  • Consolidating debt
  • Implementing asset protection strategies such as separate personal and business assets
  • Monitoring cash flow to ensure you have enough funds to cover expenses and debt obligations and to avoid overextending your business financially, which can impact your credit.

In some circumstances, credit counselling agencies and credit repair companies can provide valuable guidance and support.

2. Understand Your Credit Report Inside Out

Knowledge is power, which is why a crucial step to improving your credit history is gaining a comprehensive understanding of your credit report. Obtain a copy of your credit report from one of the major credit bureaus in Australia, such as Equifax, Experian, or Illion. Review the report carefully, preferably in the company of an experienced accountant or broker, paying attention to the following:

  • Credit Accounts: Identify all the credit accounts listed in your report, including credit cards, loans, and other financial obligations.
  • Payment History: Analyse your payment history to spot any late payments, defaults, or other negative marks. This will help you pinpoint areas that need improvement.
  • Credit Inquiries: Check for any recent credit inquiries, as multiple inquiries in a short time can negatively impact your credit score.
  • Credit Balances: Assess your credit balances to ensure they are within reasonable limits. High credit utilisation can harm your credit score.

3. Create a Sensible Budget and Payment Plan

Once you’ve identified areas that require improvement, it’s time to create a practical budget and payment plan. If you’re currently a borrower with PSA, we assist you in this process to find appropriate strategies to help you improve your credit score. This involves:

  • Prioritising Payments: Focus on paying off past-due accounts and high-interest debts first. Timely payments are essential for rebuilding your credit.
  • Setting Realistic Goals: Establish achievable financial goals and timelines for paying down your debts. Make sure your budget allows for these payments without straining your business’s finances.
  • Automating Payments: To avoid late payments, set up automatic transfers or reminders for your bills. This can help ensure that payments are made on time, which is a key factor in improving your credit history.
  • Reducing Credit Card Balances: Aim to reduce the balances on your credit cards. High credit card balances relative to your credit limit can negatively impact your credit score.

Improving your business credit history is a gradual process that requires diligence and financial responsibility. Remember that building a good credit score takes time, so stay committed to these practices to reap the long-term benefits for your business’s financial health. Give PSA a call today on (03) 9847 7689 to discuss how our finance experts can help you improve your credit score, assist you in finding the funds you need to get back on your feet and put you on the path to repairing your credit.

Author picture

PSA’s Director, Peter Marmara-Stewart, is a highly successful business owner and finance professional in Melbourne. As a certified Financial Planner with over 15 years of experience in business finance, accounting, and asset management, he provides clients with unparalleled expertise in asset protection, debt elimination and business restructuring. Call (03) 9847 7689 and see how Peter and the PSA team can help you get on the smarter path to financial returns.