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How, When and Why to Monitor and Improve Your Credit Score

Source: How, when and why to monitor—and improve—your credit score

It is important for your business to have a good credit score, especially when negotiating financing or credit terms with financial institutions and vendors. A credit score is a number that represents how likely you are to pay your bills on time, and therefore how risky it is to lend you money. The credit bureaus regularly update credit scores based on a variety of factors, such as whether you carry a balance on your credit card, if you miss bill payments, if you’re close to your credit limit, etc. It is important to monitor your company’s score frequently and report any errors that may appear.

Who are the credit bureaus in Canada?

There are three major commercial credit reporting organizations in Canada:

What gives you a good credit score?

A good business credit score is not obtained immediately. Over time, the credit bureaus consider the following factors when determining your credit score:

  • Data gathered from vendors about your payment history, including cash flow, returned cheques, working capital, net worth and financial resources.
  • Your company’s business reports and corporate filings.
  • Any third-party collection claims, legal suits and judgments.
  • Data gathered from your business through interviews and investigations.

When should you check your credit score?

There is no one-size-fits-all answer. You need to pick a frequency that suits your business. If you have never looked over your score, we recommend immediately adding this task to your priorities list. After you check it once, perhaps you will review your credit score twice a year, once a year or every quarter. 

No matter how often you take this step, it is important to make it part of your routine. There may be a fee to order your report. You can also consider using the bureau’s monitoring service, and receive alerts when there are changes to your report and score. 

How can you improve your company’s credit score?

If your credit score is not great, start today to improve your credit report. Here are a few ideas to enhance your company’s credit report:

  • Pay your bills on time. When possible, pay vendors in advance of their deadlines.
  • Report and fix errors on your credit report. Where a dispute exists such as with a merchant service’s provider, make the details known. While the dispute may not be removed, it will alert other creditors to your side of the story.
  • Where your vendors’ data is not part of your credit score, if you pay bills on time or early, ask the vendors to submit their data to the credit bureaus.
  • Self-report to the credit bureaus. You can contribute to your company’s credit profile.

What if there are errors on your report?

If you spot an error, contact the credit bureau right away to report it. If the issue is related to data from a vendor, you also need to contact the vendor right away. 

Learn what steps you need to take to fix the error. Gather all necessary documentation that may help to resolve the situation. Be diligent to ensure inaccuracies are fixed.

You have the ability and the responsibility to ensure your business credit score is telling the right story about your business. 

By building your credit rating and regularly monitoring your credit score, you will ensure your business is financially stable and credit worthy.

Key Takeaways
It is important for businesses to have a good credit score for negotiating financing or credit terms with financial institutions and vendors.
The three major commercial credit reporting organizations in Canada are Dun & Bradstreet, Equifax, and TransUnion.
A good business credit score is determined over time by factors such as payment history, business reports, legal claims, and investigations.
Businesses should monitor their credit score frequently and report any errors that may appear.
Improving your company's credit score can be done by paying bills on time, reporting and fixing errors, asking vendors to submit data to credit bureaus, and self-reporting to credit bureaus.
If you spot an error on your credit report, contact the credit bureau and vendor right away and gather necessary documentation to resolve the situation.
Regularly monitoring your credit score and building your credit rating will ensure your business is financially stable and creditworthy.