Business credit is not based on your social security number and personal credit information. It is associated with your EIN, business name, company address and phone number. Protecting and constantly improving this credit history should be a top priority for you as a business owner. Business credit that is in good standing enables you to obtain loans and lines of credit that help you expand your business when the timing and opportunities present themselves. Another reason to build outstanding business credit is because anyone can access this information easily; this includes customers, suppliers and competitors. Therefore, your business credit score reflects the character of your company and its business dealings. Another important motive to build optimum business credit is because the credit score is not based on your company's collateral, cash flow or other financial considerations. It is only based on your business payment history. The following are ways to build your business credit score.
One of the first steps in building your business credit score is to sign up with Dun & Bradstreet to obtain your complimentary DUNS number. This company is the largest business credit reporting agency in the world, and it reports on 10 times more businesses than the second largest agency. Experian Business and Equifax Business are the second and third largest business credit reporting agencies. Become a subscriber to one of these major business credit reporting agencies by registering with them online and submitting your most current financial statement.
Many new entrepreneurs aren't aware that most trade vendors don't report to Dun & Bradstreet or any other credit reporting agencies. One way that you can get around this is to sign up for the Credit Builder program at Dun & Bradstreet. This ensures that the accounts you pay on each month are added to your credit report, which enables you to increase your business credit even though small businesses don't typically report to these agencies. Your business credit score will also increase from having those positive reports added.
You may be fearful of getting in over your head with store credit accounts or lines of credit, but these are instrumental in helping your business expand and grow in the future. Positive payment histories add credibility to your company. Clients and customers will see this and think of your business as trustworthy and reputable. Be selective in the places that you ask for accounts or credit lines. It is best to work directly with companies that report to one of the three major business credit reporting agencies. It is sometimes difficult to know which companies take the time to report and who are lenient enough to give credit to a fledgling business with no credit history. Three that we recommend are Uline, that offers packing and shipping supplies; Reliable Office Supplies, which is a great resource to purchase all your office supply needs; and Laughlin & Associates, a company that can provide many services for your business, whether you are just starting or ready to expand.
After you have established yourself for two or three months with the above businesses, they will report to the credit reporting agencies. This credit history will make it much easier to obtain credit accounts and lines of credit at other places in the future.
Keep your business credit strong by not submitting your Social Security number on the business credit accounts and lines of credit. This assures that the accounts you open are based on what the business can pay and that they don't wreak havoc on your personal credit by making you liable. Do this by listing your business entity as a corporation or LLC. You can't keep your personal credit history separate from your business if you have a sole proprietorship or partnership. This is an especially important factor if you have a low personal credit score.
Keep an eye on your business credit report and check it consistently--at least once every quarter. Knowing your business credit score and the information on your business credit reports ensures that any errors are corrected in a timely manner. If any mistakes occur, contact the business credit reporting agency to have it corrected. You can sign up for a free business credit report and review at creditsuite.com/consult. You will be able to get your Credit Safe credit report for free, as well as get a review of your Experian report and score.
Make your business credit account payments consistently and on time. Better yet, make the payments early, if possible. Some people actually start a business because they were laid off or fired from a job and they feel that starting their own business is the best way of surviving the economic chaos that a job loss causes. Many others have poor personal credit, but have learned from the experience and are determined to have a robust business credit score. Regardless of your personal credit score, your business credit rating has the potential to be considered excellent if you simply pay your bills on time. Doing so opens the door to lines of credit and other opportunities to build capital. This, along with a savvy business entity, can pave the road to success for you and other entrepreneurs like you who have the determination and strong work ethic to succeed.
That's Not Linked to Your SSN
in 4 Simple Steps