5 Business Credit Habits to Avoid

1 Closing Credit Cards

Surprisingly to many, closing a credit card has a long term financial implication that contradicts popular myth. The idea that having too many cards gives a bad impression and lowers your credit scores is a fallacy. It is not the same as having maxed out credit on a number of cards which does indeed lower your credit score. Having many available forms of credit that have unused funds shows you are responsible and have access to many forms of payment as well as that others have found you a good credit risk.

2 Leaving Open Credit Cards Languish

Not using your available credit on existing small business credit cards is almost as bad as closing a credit card account. The reason for this is two-fold. First if you do not use a card you will not have any payments to make. While that sounds like a positive thing it actually has a serious implication in regards to your credit score. Without regular reporting by your credit card bank there is no history of good payments and eventually the card will not show up at all on your credit report so it is as if you do not even have that backing available. Secondly the banks issuing those cards will likely eventually close the card on you due to inactivity. It is of no use to them to have active non-productive assets. If a bank closes your credit account it can show as a negative on your report, or equally as bad, you will simply loose it as a valuable credit asset.

3 Not Making Regular Payments

This mistake is fairly obvious and just about everyone from all walks of life understands that not making regular scheduled payments in at least the minimum amount due will have a serious impact on your credit score. What some small businesses do not know is that making payments higher than your minimum amount, even if just a dollar more, will have a great positive impact on your credit score. Credit reporting agencies often show payments made over the minimum amount but they do not give any indication of how much over the minimum payment you made was.

The frequency and length of time involved in late payments will also have an impact so if something happens and you do find yourself having missed a payment get it in as quick as possible to make the impact as light as possible. At all costs avoid repeatedly missing payment dates even for as little as one day. If you pay your credit card bills through regular mail allow plenty of time for it to arrive at its destination on time and be processed. Paying online can alleviate many late payment problems and even be pre-set to be paid at a pre-determined future date just before the account is due so you can be certain of not missing payment dates.

4 Settling a Delinquent Credit Card Debt

If your business has found itself in dire straights that make paying existing credit card debt difficult there is a tendency to attempt to make a deal with the bank to settle for a smaller amount. While this may solve your immediate problem of paying the debt it will have severe implications on your credit score. The financing bank holding the credit card debt may settle with you but they will report the amount that is written off against your credit report as a "deficiency balance" and it will remain on your credit report for seven years.

A better choice is to approach your lending institution and seek a method of refinancing debts that have become a burden. Packaging several debts into a single payment that may be lower than each individual account combined might allow you to make your payments without forfeiting your credit score. Always seek responsible means of accomplishing this. It is best to obtain a loan from your regular banking facility because they know you, they may have a vested interest in keeping you solvent, and most of all they are legitimate in their lending practices.

5 Over Using Available Credit Cards

While having established lines of credit available have a very positive effect on your credit rating and your solvency, overusing credit cards to the point of reaching maximum limits on one or several cards is a critical mistake. Not only will you have dissolved your fluency and created high levels of payment obligations having a high debt load in relation to your available credit removes any benefits that having that credit has on your rating.

Use your available credit cards in a responsible manner to forward your business goals and keep them active but take precautions to avoid making un-necessary purchases, payments you cannot afford, and charging to the limits of your card.

Credit reports show financial institutions and even other businesses that you have revenue potential, that you are responsible, help them to predict your bankruptcy potential, and even if you have made mistakes in the past it can give valuable insight to your attrition and desire to work hard to correct past errors.

Small businesses need credit and used wisely it is one of the most valuable assets your company can have. Opening several small business credit card accounts will give you the liquidity to make important things happen for your company and build your credit rating. Avoid making the above mistakes but remember that if you do, or have in the past, none of them are impossible to correct. If your credit reflects troubles in the past work diligently to avoid more in the future and show a strengthening responsibility so that future lenders will feel secure in the stability of your company.