Published By Janet Gershen-Siegel at August 7, 2017
Building corporate credit means your company gets opportunities you never thought you would. You can bid on real estate, get new equipment, and cover payroll, even when times are a little tight. This is particularly useful in seasonal businesses, where you can go for months with only minimal sales.
Because of this, you need to work on building your corporate credit. Improve and maintain your scores and you will have these opportunities. Don’t, and either you don’t get these opportunities, or they will cost you a lot more. And no business owner wants that. You need to know what affects your business credit before you can make it better.
Late payments will affect your business credit score for a good seven years. If you pay your business (and personal) debts off, as quickly as possible and as completely as possible, then you can make a very real difference when it comes to your credit scores. Make sure to pay on time and you will reap the rewards of punctuality.
This is essentially how long your company has been using business credit. Of course newer businesses will have short credit histories. While there is not too much you can specifically do about that, all is not lost! Credit reporting bureaus will also look at your personal credit score and your own history of payments. If your personal credit is good, and in particular if you have a fairly long credit history (that is, you did not just get your first credit card last week), then your personal credit can come to the rescue of your corporate.
Of course the inverse is also true – if your personal credit history is not so hot, then it will affect your corporate credit scores until your business and personal credit can be separated.
Having a bad year? Then it could end up on your personal credit score. And if your business has not been around for too long, it will directly affect your corporate credit. However, you can unlink the two by taking steps to separate them. For example, if you get credit cards only for your business, or you open up business checking accounts and other bank accounts (or even get a business loan), then the credit reporting bureaus will start to treat your personal and corporate credit separately. Also, be sure to incorporate, or at least file a DBA (doing business as) status. You can also pay your company’s bills with your company credit card or checking account, and make sure it’s the business’s name on the bill and not your own.
Just like every other entity out there, credit reporting bureaus like Equifax and Experian are only as good as their data. If your company’s name is similar to another’s, or your name is a lot like another business owner’s, there can potentially be some mistakes. So monitor those reports, and your business report atDun & Bradstreet, PAYDEX. Stay on top of these reports and dispute charges with documentation and clear communications. Don’t just let them stay wrong! You can fix this! And while you’re at it,you should also be monitoring the credit reporting bureau which only handles personal and not corporate credit, TransUnion. If you don’t know how to pull a credit report, don’t worry. It’s easy – just use the above links.
Credit utilization rate just means the amount of money you have on credit divided by your total available credit. Lenders generally don’t want to see this go above 30% (so for every $100 in credit, don’t borrow on more than $30 of that). If this percentage is climbing, you’ll need to spend down and pay off your debts before borrowing more.
Once you know what affects your business credit score, you are that much closer to building better corporate credit.