How to Maintain Your Business CIBIL Score Above 700

5 min 02 Feb 2024

Highlights:

Easy Tips to Maintain a Good Business CIBIL Score
Significance of Maintaining a Business CIBIL Score Above 700

A business credit score is a numerical representation of a company's creditworthiness, similar to an individual's credit score. It reflects your business's ability to repay its debts and obligations, based on its credit history, current debts, and other financial factors. Lenders, suppliers, and investors use this score to assess the risk of engaging in financial transactions with the business. The score can influence credit terms, such as interest rates and credit limits. It can impact the company's ability to secure financing at favourable terms.

What is an Ideal Business CIBIL Score?

Various credit bureaus have their own scoring models to determine a company's credit score. This score ranges from 300 to 900. A score above 700 signifies a strong repayment history on the credit utilised by your business. The most important credit bureau in India, namely CIBIL generates a Credit Information Report (CIR) and assigns appropriate credit scores, also known as CIBIL scores to anyone seeking credit, be it companies or individuals. CRIF High Mark, Experian, and Equifax are the other credit bureaus that provide valid CIRs and credit scores you can check.

Smart Tips to Maintain a Business CIBIL Score Above 700

Improving business credit score takes time. With prudent financial practices, you can enhance and maintain a good business CIBIL score above the requisite mark of 700:

1. Repay Credit Dues

One of the best ways to build a business credit score is by making regular and timely payments of bills and credit dues. Ensure your EMIs or credit bills are paid before the due date. Clear the outstanding amount on credit card bills in full each time. If you only pay the minimum sum, the interest and taxes will accumulate in the next billing cycle, creating a bigger debt.

2. Limit Credit Utilisation

Whenever you avail of credit, restrict your credit usage within the available limit. Usually, the credit utilisation ratio should be less than 30%. Exceeding this limit will harm your business credit score. Therefore, if your company’s expenses are higher, opt for a higher credit limit to protect your credit rating.

3. Avoid Multiple Loans

When you apply for a loan, your lender conducts a credit score inquiry to assess your creditworthiness. Such an inquiry is known as a hard inquiry and can decrease your credit score. Therefore, avoid applying for multiple loans simultaneously. It is also advisable to close existing loans before availing a new one. Similarly, holding multiple credit cards and using them for high-value purchases can be counterproductive if you are unable to pay the bills on time.

4. Check Your Credit Report

Your credit report may contain errors or incorrect information, which can adversely impact your business CIBIL score. Therefore, check your firm’s credit report periodically and get the mistake rectified immediately to improve your score. You can easily check your CIBIL score by visiting the official website of any credit bureau or through credible third-party websites that offer access to credit scores.

5. Get a Mixed Credit Portfolio

Your organisation's credit portfolio should ideally have various types of credit. A mix of secured and unsecured loans with both long and short tenures can strengthen your credit history. Additionally, you should retain older credit accounts with a good repayment record to enhance your creditworthiness.

Also Read: What is Credit Mix and How Can it Improve Your Credit Score?

Is it Important to Maintain a Business CIBIL Score Above 700?

Lenders normally consider a minimum business credit score of 700 and above while granting loan approvals to companies. They classify potential loan borrowers according to their credit score extending risk-based pricing on certain loans. Thus, companies with a high CIBIL score pose minimal lending risks and can secure substantial loans at attractive interest rates.

Further, business owners can leverage their good credit and personal profiles for more favourable loan terms. A good CIBIL score signifies a credible customer who can manage loans responsibly. A CIBIL score below 700 may result in unfavourable loan terms, such as higher interest rates or shorter repayment tenures.

Maintaining a business CIBIL score above 700 is important for the well-being of a company. Both new and established businesses can improve their credit score in case they have a low CIBIL score. This is an ongoing task that requires smart planning and financial discipline. Monitor your business credit report, track the different lines of credit, observe spending patterns, and ensure timely repayment of debts.

Also Read: Ways You Can Improve Your Credit Score for a Small Business

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