Similar to individual credit scores, a business credit score is a measure used to calculate a business’s creditworthiness. It is composed of various factors that help assess your company’s financial position and determine its level of financial risk. A business credit score ranges from 0 to 100. A score below 40 indicates high risk, a score between 40 and 80 indicates medium risk, while a score of 80 and above indicates low risk.
Tourism and Hospitality
Malaysia’s captivating rainforests, friendly locals, culinary delights, and favourable exchange rate make it an enticing destination for travelers eager to make up for lost time after the recent pandemic. While other countries tighten regulations on homestay apps like Airbnb, Malaysia takes the opposite approach by reaffirming its homestay program initiated in 1995. This program encourages rural communities to venture into the tourism and hospitality sector, leading to the flourishing ecotourism industry, beloved by both local and international travellers.
When your business has a high credit score, which translates to low risk, your company is in a much better position to obtain additional funds when needed, such as business loans from the bank or attracting investors who are assessing the viability of your business. Having a strong business credit score offers several advantages. You can benefit from better deals, lower interest rates, and attract more suppliers willing to work with you, as it demonstrates the reliability of your business.
As an investment group that frequently examines the business credit scores of potential investments, PEGH would like to offer some healthy habits that we strongly advise business owners to follow in order to improve their business credit scores.
Check Your Business Credit Reports Regularly
To begin, it is important to understand your current business credit score, which can be accomplished by reviewing your business credit reports. While individuals may suffice with checking their credit reports once a year, businesses have greater financial responsibilities, making it advisable to check their reports at least once every quarter.
If your business is based in Malaysia, there are four main sources that provide credit scores and reports: the Central Credit Reference Information System (CCRIS), Credit Tip-Off Service (CTOS), RAM Credit Information (RAMCI), and the Credit Bureau of Malaysia.
Pay Your Bills On Time
Arguably one of the most important habits to consider is the absolute essentiality of paying all your bills on time. Your history of timely bill payments has a significant impact on your credit score. Therefore, it is crucial to develop an ingrained habit of paying all your business bills on time to avoid any negative consequences.
Decrease Your Credit Utilization Ratio
Even if you pay your bills regularly and on time, it is equally important to demonstrate that your business practices smart and frugal spending habits. If your business frequently relies on credit cards for purchases, it is essential to avoid maxing out your credit cards or business line of credit in order to fulfill necessary payments.
Establish Credit Accounts With Suppliers
If your business regularly deals with multiple suppliers, it would be wise to open accounts with them. By doing so, you will increase the number of businesses that can provide positive reports to your business credit, ultimately leading to an improved business credit score.
Take Advantage Of Previous Positive Payment Experiences
If your business has a history of positive and reliable payment experiences with other suppliers or businesses that regularly file their business credit reports, you can also request them to report that favourable payment history to the credit bureaus.
Dispute Errors And Inquiries
When checking your business credit score reports every quarter, as you should, if you come across any errors or improperly filed inquiries, be sure to challenge and dispute them. This will help ensure that any wrongful mistakes, not originating from your company, do not unjustly harm your business credit score.
Resolve And Delete Collection Records
While it is easy to promote positive habits, we all make mistakes, and your business may end up in collections. During such times, it is crucial to prioritize paying off any outstanding debts you have with the collections agency. Once resolved, you can also negotiate with them to remove the negative report they previously filed, thus keeping your credit score intact.
In short, adopting these healthy habits to improve your business credit score is a wise investment in the financial well-being of your company. By diligently following these practices, you can enhance your creditworthiness, gain access to favourable financing opportunities, and demonstrate reliability to potential investors and suppliers. As an investment group that values the importance of business credit scores, PEGH encourages business owners to prioritize their credit health and take proactive steps towards achieving a strong and reputable standing. By doing so, you pave the way for long-term success and growth in today’s competitive business landscape.