How A Payment History Affects Your Company Credit Score

Credit ratings and company credit reports either work for or against your business. A high credit rating allows your company to take out loans at the lowest interest rate whereas a poor credit rating can lead to your company being turned down for a loan. That’s why it’s crucial to maintain an excellent credit score and payment history is the most important factor in its calculation. So as long as your payment history is flawless you can count on a reasonably high credit score and vice versa; the more unpaid debts you have, the lower your score.

The primary objective of your company credit score is to illustrate just how likely you’re to repay your debts. To calculate your score, five different factors are considered: how much new credit you have, what types of credit there are, how much debt you have, how long you’ve had credit and how you’ve handled it. Your payment history plays a crucial role here and if you’re looking to improve your score, focusing on your payment history is a smart place to start.

The data contained in your payment history can be broken down into seven components: payment information on various types of accounts, any adverse public records, any delinquent payments, the amount of money owed, the time passed since any delinquencies, the number of past due items and the number of paid accounts. Most creditors don’t report missed payments until they become at least 30 days late, others may not report them at all. As these negative items generally stay on your company credit report for at least seven years, it might be very difficult to raise your credit score or assure your business partners that you’re not a late payer.

Building a strong payment history is all about what you do wrong and getting rid of bad habits. Making consistent, on-time payments while avoiding late payment mistakes can guarantee you get a great score in the future. If you’re 30 days late with your payment, it can drop your company credit score by as much as 100 points. In this case you’re also expected to wait at least 3 years before your company credit score fully recovers. Thus your own mistakes can take years and cost you a lot before they disappear entirely. That’s why it’s top priority to be cautious about every payment you make or most importantly you don’t make. If you manage your credit responsibly, you may never have to deal with a bad credit score.

Credit scores play an important role for businesses searching for the best lending deals on the market. It’s essential to have a good payment history and a flawless credit profile if you want to get top rates which are out of reach for anyone with isuues. Your payment history makes up 35% of your company credit score so the more debts you have, the more it affects your credit score. To avoid lowering your score, build a strong payment history and always pay your bills on time.