How to improve your credit score

It’s the sort of thing that is rarely front of mind, but a poor credit profile can put the brakes on a business looking to grow, limiting your access to business finance or making it more expensive.

It’s common for your credit history to be checked when you’re seeking a business loan to purchase say new machinery or fund a business expansion, adds Business Development and Performance Coach Gaylene Hughes, from JDI Business Coaching.

“In the event that you’re buying an asset, a good credit history may mean you can borrow at lower interest rates when the need arises,” says Hughes.

“It’s important to remember that your personal and business credit history are linked and follow you.”

What is a credit profile

It’s best to think of your credit profile by breaking it up into the following two categories:

Credit report – contains information about your credit history including your credit score, current borrowings, all the times you’ve been given credit by a bank or company, unpaid or overdue loans, court judgments against you, and payment and default history.

Credit score – this score is calculated based on your credit report. Each credit reporting agency has its own formula that usually ranges from zero to 1000, but sometimes as high as 1500. The higher the score, the better.

In New Zealand, there are three main credit reporting companies: Centrix, illion and Equifax.

It’s free to get a copy of your credit report, but like most things in life, if you want the information quickly, you’ll need to pay for it.

How to improve a poor credit score

In New Zealand, you have the right to ask for a copy of your own credit report, and check and correct information that’s wrong.

You can request a copy of your report as often as you wish, and credit report companies are obligated to provide it without too much delay. They can charge a small fee if you want the information within three working days, but not more than $10.

If you unexpectedly find out you have a poor credit score, the first step is to look for mistakes and get them corrected.

If you believe that your poor credit rating is the result of fraud, you also have the right to ask that your credit file is ‘frozen’ and not released to anyone without your permission. You can then complain to the credit reporting company.

The Office of the Privacy Commissioner explains that freezing your report should make it more difficult for a fraudster to obtain new credit in your name, as credit providers will usually not grant new credit when they’re unable to do a credit check.

If your poor credit score is not the result of a mistake or fraud, improving your credit score might take time.

Indeed, a default can stay on your credit record for up to five years, even after you have paid the amount in full.

Rest assured though that credit reports include both positive and negative credit history, so there are steps you can take to improve your credit score over time.

8 tips for improving your credit score

Hughes shares her eight tips for improving your credit score:

  1. Pay bills and make loan repayments on time. “Set up weekly or monthly automatic payments if you can, from an account that’s harder to access.”
  2. Check for mistakes. Everyone makes mistakes, including credit reporting agencies. So make sure they don’t negatively impact your business by checking your credit report for errors.
  3. Manage your cash flow. “It’s important you understand your cash flow and avoid any penalty charges, especially for unpaid or partially paid PAYE, GST and tax to the Inland Revenue,” Hughes says.
  4. Transparency. “If you do get into trouble with creditors, talk to them. They’ll possibly be open to putting a payment plan in place: better to be paid something than nothing.”
  5. Don’t maintain more debt than you need: You shouldn’t be scared of debt, but too much can be your undoing. “Live within your means. Don’t be swayed by sales talk or a ‘special’ that’s just too good to be true. That can result in overcommitting to things you can’t pay off.”
  6. Consolidate. “If you have a credit card, ideally pay it off each month. If you have more than one credit card, consolidate the debt onto one card then cut the others up. Carefully manage any corporate credit cards within the business by regularly reviewing and paying these.”
  7. Know your numbers. “What’s your income and what are your regular outgoings? Live within your means where possible and get some budgeting advice – it’s amazing where you can make savings.”
  8. Follow up debtors. “Regularly follow up people who owe you money and remember it’s not a good thing to have too many eggs in one basket – do work for more than one customer.”

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

Customer success story: Animal Natural Health Centre

Sourcing funding can cause worry lines for small business owners, as Sarndra (Sandy) Urwin discovered when she wanted to expand the retail offering within her small business. That’s why she partnered with Prospa, which she now calls the best anti-wrinkle cream around.

Hear more about Sandy’s small business story:

All her life, Sandy has had a firm belief that “nature knows best”, and this became a foundational value for her business Animal Natural Health Centre, based in Orewa, New Zealand.

“I’ve always felt that prevention is better than cure,” she says.

Sandy left her work as a nurse to pursue her passions for natural healthcare and working with animals, while also filling what she saw as a gap in the market.

“There was nobody offering choices in healthcare for animals, so I thought, ‘Why aren’t we doing this?’,” she says.

She opened Animal Natural Health Centre in 2008, offering both consultation services and natural products for animals, many of which are handmade in house under her White Tui label.

“My purpose and vision for the business was to offer people a choice in animal healthcare. I really wanted to take a holistic approach,” she says.

Offering more to customers

As her customer base grew, Sandy felt it was time to expand the retail side of the business to meet the growing demand for her natural animal healthcare products, including sunburn creams, pain relief, allergy treatments and sprays to ease anxiety or stress caused by noise.

“We had a very limited range of stock because we didn’t have the capital to invest in the new products that our customers were looking for,” she says.

At one point, Sandy considered selling part of the business to an investor in order to gain more capital. But in her view, that would mean abandoning some of the reasons why she began Animal Natural Health Centre in the first place.

“It would have been quite heartbreaking, actually,” she says.

As many small business owners know, you can’t buy trust. Sandy was concerned that the reputation she had spent years building within the community and with her customers “wouldn’t have gone along with the sale”.

“We didn’t want to compromise,” Sandy says.

A win-win situation

Instead, Sandy turned to Prospa for a small business loan, which she felt would enable her to achieve her business goals without having to make trade-offs.

From the very start, Sandy felt Prospa was the right partner for her small business.

“When I first contacted Prospa, I was impressed by their enthusiasm and interest. They really wanted to listen to my story, and they were just as enthusiastic as I am about my business,” she says.

“Working with banks can be like pushing water uphill with a straw, whereas Prospa was quick in their actions. You know exactly where you stand with them at any moment of the day, and I like that.”

She says Prospa’s attention to detail, prompt customer service and general willingness to find a win-win situation gave her a lot of confidence.

“With a small business loan, we’ve been able to expand our range of products and give our customers better service, and equally important, I no longer have the thought that I need to sell,” she says.

A focus on the customer

Now that Sandy isn’t worried about cash flow, she’s looking forward to her future plans for the business, especially expanding her education and outreach programs. She is currently looking to develop course material and protocols for natural animal healthcare.

She also wants to share her passion for holistic animal health with the wider community, and in doing so, empower people to make more informed choices about what’s right for their pet.

“The customers are what drives you and your business – they are my favourite part of being a small business owner,” she says – and that includes the animals and their humans.

“Small businesses do have the opportunity to make huge changes in our communities, and thanks to Prospa, we can keep doing that.”

A Prospa Small Business Loan has helped Sandy and Animal Natural Health Centre to:

  • Increase the variety and volume of stock available for customers.
  • See an increase in monthly turnover.
  • Not compromise on quality or her vision for the business by selling a stake to an investor.

Whether it’s growing your business, funding an opportunity or just covering cash flow, find out how Prospa can help keep your small business moving. Talk to one of our small business finance specialists on 0800 005 797 to discuss your options, or find out more.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.