How to increase credit score: Quick guide for businesses

Summary: Learning how to increase credit score is critical for financial stability, but it needs a good understanding of the CIBIL credit score. Read on to know how to improve credit score, a good credit score range and much more right here!

17 Aug 2023 by Team FinFIRST

Visit Now

If you have recently begun your business, you must know everything about CIBIL credit score. It not only impacts your ability to take loans but also affects your chances of securing a funding. Learn how to increase credit score with practical tips and insights to get you started.

What is a credit score and how is it calculated?

A credit score is a numerical representation of your creditworthiness that is used by the lenders to determine your eligibility for credit products like loans and credit cards. A credit score is calculated based on various factors like your credit history, outstanding debt, payment history, and credit utilisation.

The most commonly used credit score in India is the CIBIL credit score. This credit score ranges from 300-900. The higher your credit score, the better your chances of getting approved for credit products and getting better interest rates.

Startup funding to mentorship: 7 ways to starting a small business

Grow your startup with IDFC FIRST Bank’s Leap to Unicorn program

What is IDFC FIRST Bank's Leap to Unicorn, and how can it benefit your startup?

Why it is important for a new business to have a good credit score

Here are some reasons why it is important to have a good credit score -

Access to funding - Makes it easier to obtain loans and other types of funding to grow your business.
Lower interest rates – Can qualify for lower interest rates on loans and credit cards, which can save you money.
Better vendor relationships - Can help you establish better relationships with vendors and suppliers.
Improved cash flow - You will be able to negotiate better payment terms with suppliers, which can improve your cash flow and help you manage your finances more effectively.

How to increase credit score

Here are some practical tips on how to increase credit score -

Pay bills on time

You can improve your credit score range by setting up automatic payments, using bill reminders, consolidating your debt into one monthly payment, etc. This will ensure you pay your bills on time.
Keep credit utilisation low

It is best to pay off credit card balances without accruing additional interest, tracking your credit limit, and requesting a higher credit limit from your credit card issuer. You will be able to keep your credit utilisation ratio low, which will help improve your credit score.
Monitor your credit report

Another way to increase your credit score is by monitoring your monthly reports, identifying fraudulent activities, and reviewing your credit report carefully each month. This gives you a quick peek about your financial status and helps you identify potential slips and misses.
Maintain a good relationship with creditors

Another way to improve your credit score is by maintaining regular communication, paying bills on time, and keeping your creditors informed in case of any delay. This will help you stay organised and track your bills closely.

Also read - Credit card terminology you should know before you sign up for a credit card

How credit-building tools can help in improving credit score?

Credit-building tools are financial instruments that can help individuals and businesses improve their credit score range.

Some of the common credit-building tools for businesses include -

Business credit cards - Specifically designed for businesses. It allows a company to make purchases and earn rewards while building its credit history.
Lines of credit - Allows businesses to borrow money up to a pre-approved limit.
Business loans - The money that a business borrows and repays over a specific period. Repaying a business loan on time can help build credit.
Invoice factoring - Allows businesses to sell their outstanding invoices to a factoring company for a percentage of their value.

How to check your credit score

You can request a free online credit report from the major credit bureaus of India

Review your credit report for accuracy. Make sure that all the information is correct and up to date.
Understand your credit score. Your credit score is a three-digit number that is calculated based on your credit history, payment history, outstanding debt, and other factors.
Monitor your credit score regularly. You can check your score for free using various online tools or services.

Conclusion

Boosting your CIBIL credit score is essential for any new business looking to establish a strong financial foundation. By following the tips and strategies outlined in this article, you can take the necessary steps to improve your creditworthiness and gain access to better financing options.

Looking for a credit card that is apt for your new business’s requirements? IDFC FIRST Bank Start-up Credit Card comes with step-up credit facility, offers up to 10X rewards points, and also provides cloud services, a CRM tool, analytics engine, and more.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.