Boost Your Personal Credit Score: Take These Four Steps

For most small business owners, a personal credit score is still an important metric lenders may consider to measure your creditworthiness when evaluating your application for a small business loan. While different lenders weight the score differently, the benefits of building and maintaining a good personal credit score will likely never go away. With that in mind, here are four things you can start today, to boost your score:

1. Regularly Review Your Score: It’s never been easier to know what lenders see when they review your personal credit score. In fact, in the United States it’s required by law that every consumer have free access to his or her score at least once a year (in Canada, as long as you will accept a hard copy mailed to you, you can request a free copy of your score anytime you want). There are also very low cost alternatives that allow you to view your score more frequently and even notify you every time there is a change to your report. The three major reporting bureaus in the United States are Experian, Equifax, and Transunion. The Canadian counterparts of Equifax and Transunion provide similar services in Canada.

2. Set Up Automatic Payments: The single biggest way to have a positive impact on your personal credit score is to make timely payments on your credit accounts (it accounts for roughly a third of your score). A simple way to do that is to establish automatic bill pay on expenses you regularly pay every month. An auto loan payment that is automatically deducted each month is never late—provided you keep enough money in the account to cover the automatic debit each month. Automatic bill pay makes it less likely you’ll forget to make a payment on time.

3. Keep Your Credit Balances Low: Another 30 percent of your credit score is a reflection of the amount of credit you have verses the amount of credit you use. If your goal is to improve your credit score, try to keep your credit usage around 15 percent of your available credit limit—the lower the better. If your usage is higher than that right now, any effort to lower your credit usage will improve your score.

4. Don’t Apply For Credit You Don’t Need, But Don’t Close Old Accounts: Credit inquiries can actually hurt your credit, so don’t apply for credit you don’t really need. And, because 15 percent of your credit score is a reflection of the average age of your credit accounts (the longer the relationships the better), it’s not a good idea to cancel old card or credit accounts. The longer the history, the better able the bureaus will be able to predict your positive credit behavior.

The need to build or maintain a good personal credit score will likely never go away for most small business owners. If you currently have a less-than-perfect credit score, you might not be able to build a great score overnight, but you’ll start seeing improvements if you begin working on making improvements today. Our Business Owner’s Guide to Personal Credit on is a great resource to learn more about your personal credit score.