However it happened, you find your business with a poor credit score. This is more common than you may realize, especially if you’re a small business owner. Sometimes, credit issues arise because of cash flow problems that leave you without capital right when you need to pay back your suppliers. Other times, mistakes are to blame, such as maxing out a credit card to buy equipment without realizing that it negatively affects your credit score. Is credit repair even possible?

It’s Never Too Late

Poor credit is an obstacle for businesses, but it’s probably not the first time you’ve run into challenges. Instead of giving up on the idea of getting a loan because of bad credit, treat the problem like any other obstacle. Figure out what caused the issue, make changes to avoid further problems and then plan a way to make your business stronger. This is something any business can do, and the sooner you get started the better.

Bills Need To Go

If you have debts that are driving your credit score down, they need to become your priority. Of course, you still need capital to keep operations going, but you should focus on paying down debts instead of applying for high-interest loans or taking the easy road. Often, it’s possible to reach an agreement with suppliers and creditors that allows you to make smaller payments or even cancels part of the debt entirely in return for paying back most of it.

Where should you start? Get rid of the largest invoices first. Many credit scores are weighted on total dollar amounts, so the largest bills will hurt your score more than smaller ones. Checking those off your list can provide significant benefits.

Debt-to-Credit Ratios

Using up too much credit will always cause problems with your score. If you have a credit card or line of credit with a cap of $20,000, limit your total spending to about $7,000 most of the time. Aiming for a 30% credit utilization ratio is best. Going up to 50% hurts and maxing a card is a major problem.

That said, it’s also bad to swing to the opposite extreme. When focusing on credit repair, some businesses hurry to cancel all their unused credit cards, thinking that will help avoid unnecessary spending. What actually happens is your available credit goes down, making your debt-to-credit ratio skyrocket. It’s better to keep credit cards open without using them for purchases.