Is your credit score costing your business money?

Credit scores can help or hinder you in business and life. Building a good credit history is very important. Rebuilding yours after some form of personal or business financial investment is intensely frustrating but critical to getting back on your feet. These scores are used by everyone from banks to homeowners and insurance companies to evaluating it. And it's not just about your personal life, like getting a mortgage or renting a home ... your business is also affected.

Why should you care?

It costs you money. A bad credit score can:

increase the cost of your commercial insurance premiums
increase the interest rate on your business credit cards
prevent you from leasing an office or warehouse space
prevent you from leasing the equipment or increasing the lease rate you pay
prevent you from getting the business lines of credit you need to build your business
What is the difference between a credit report and a credit score?

There are three main reporting companies: Equifax, Experian, and TransUnion. These companies track financial information from public records and a wide variety of financial sources, mortgage lenders, and collection agencies. Your credit report is a detailed list of this information that each of these companies collects from your creditors and other public records. A credit score is a numerical calculation based on the information contained in each of your credit reports. Each company calculates its scores independently, and since each has its own proprietary formula, its actual score may vary from company to company.

What is in a credit score? There are five factors that contribute to your credit score:

payment history
Pending debt
Length of financial history
Amount of new credit
Types of credit used
1. Payment history

The payment history represents approximately 35 percent of your credit score. Payments made on time and in full have a positive impact; Late payments, financial judgments, bankruptcies or cancellations have a negative effect.

2. Outstanding debt

Approximately 30 percent of your Shop Simplio Credit Score  is based on the amount of your outstanding debt. Here are several calculations that come into play:

the ratio of total outstanding debt to total available debt
the ratio of the total outstanding balance of each individual credit obligation to the amount available on that loan or credit card
the number of accounts that have balances
the amount owed on different types of accounts, for example, credit cards, installment loans, or mortgage debt.
Paying balances is an important way to improve your score. Keep balances on individual cards below 30 percent of your credit limit when possible. And always avoid reaching or exceeding the maximum credit limits on any debt or credit card obligation. It's quirky, but your credit score will be better if you spread out a balance on multiple credit cards instead of maximizing one credit card: putting $ 2,500 on each of the 3 credit cards with credit limits of $ 10,000 each will be better for your score than putting $ 7,500 on a card with a limit of $ 10,000. The total amount owed does not change, but the way the scoring models perceive it does. Obviously, the best thing to do is pay off all the debt as soon as possible and not make any late payments.