Humans, by definition, aren't perfect, and it's normal for our credit histories to follow our example. As entrepreneurship is especially risky, the mistakes and rough patches small business owners inevitably endure tend to follow them around on their credit reports long after they've found success in their endeavors.
Unfortunately, poor credit can hurt an organization's ability to grow sustainably. Even with regular payments and strong cash flow, a credit report blemish can take years to overcome.
"Good business credit can be an important indicator for your company's credibility and believability," says Amber Colley, business credit expert at Dun & Bradstreet Credibility Corp.
"Good business credit can also be a determining factor as to whether or not potential partners may want to do business with a company, as well as with the cost of insurance premiums a company pays."
It's in a business owner's best interest to overcome an imperfect credit history. The process won't be easy, but it is possible to achieve. In order to do so, entrepreneurs should consider the following steps:
1. Make sure all information is up to date
The first step to resolving an imperfect credit history is research. Business owners should take the time to learn what factors may be causing the blemish and to examine fluctuations over time. This information will help business owners — and their financial advisers — identify and build a constructive path forward.
2. Take charge of your records
Colley explains that business owners can do more than watch and wait. She encourages entrepreneurs to maintain records of payment histories — especially ones made in advance.
A track record of successful and early payments, according to Colley, can help improve a business's credibility and reputation with some financial data providers.
3. Verify bad credit as accurate
Reporting mistakes can happen. That's why it's important for business owners to verify the accuracy of every single credit blemish.
"If it is not, request the credit bureau correct it," recommends entrepreneur and author William H. Joiner Jr.
A credit report should always be a two-way conversation with reporting agencies. As with a line of personal credit, business owners must take charge of their reputations.
4. Be patient and persistent
The road to successfully improving a poor credit report is not an expressway. Business owners should be prepared for setbacks, and shouldn't feel demoralized when their efforts don't immediately move the needle.
As Joiner explains, credit histories take time to repair. Business owners should be patient, persistent and optimistic in pursuing this long-term goal.
"There is no magical shortcut to good credit," says Joiner. "Good credit requires diligence and perseverance." Entrepreneurs are known for being creative, resourceful and innovative. Managing your company's credit history is no different. Don't be afraid to ask for help and be diligent about educating yourself. Research and patience will empower you to overcome any setback.