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5 Things You Should Know About Building Corporate Credit but Were Afraid to Ask

Published By Janet Gershen-Siegel at August 7th, 2017

Things You Should Know About Building Corporate Credit

What are the main things you should know about building corporate credit?

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. And you can do so 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 corporate credit before you can make it better.

Things You Should Know About Building Corporate Credit: 5. Your Payment History is Important

Late payments will affect your corporate credit score for a good seven years. If you pay your corporate (and personal) debts off, as quickly as possible and as completely as possible, a great thing happens! 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.

Things You Should Know About Building Corporate Credit: 4. Credit History Length Matters

This is essentially how long your company has been using corporate 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, then your personal credit can come to the rescue of your corporate. That is, you did not just get your first credit card last week.

Of course the inverse is also true. Hence, if your personal credit history is not so hot, then it will affect your corporate credit scores until your corporate and personal credit can be separated.

Things You Should Know About Building Corporate Credit: 3. Your Personal Credit Can Affect Your Corporate Credit

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, you can get credit cards only for your business. Or you can open up business checking accounts and other bank accounts (or even get a business loan).

And 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 corporate credit card or checking account. And make sure it’s the corporation’s name on the bill and not your own.

Things You Should Know About Building Corporate Credit: 2. The Credit Reporting Bureaus Can Get It Wrong

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 corporate credit report at Dun & 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. So, that is TransUnion. If you don’t know how to pull a credit report, don’t worry. It’s easy. Just use the above links.

Things You Should Know About Building Corporate Credit: 1. Don’t Let Your Credit Utilization Rate Drag You Down

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.

Things You Should Know About Building Corporate Credit: The Method

Corporate credit is credit in a business’s name. It doesn’t attach to an owner’s personal credit, not even if the owner is a sole proprietor and the sole employee of the small business.

Thus, a business owner’s business and individual credit scores can be very different.

Things You Should Know About Building Corporate Credit: The Benefits

Because corporate credit is independent from individual, it helps to secure an entrepreneur’s personal assets, in the event of litigation or business insolvency.

Also, with two separate credit scores, a business owner can get two separate cards from the same merchant. This effectively doubles purchasing power.

Another benefit is that even start-ups can do this. Heading to a bank for a business loan can be a formula for disappointment. But building corporate credit, when done right, is a plan for success.

Consumer credit scores depend on payments but also other factors like credit use percentages.

But for corporate credit, the scores actually just depend on whether a company pays its debts promptly.

Learn more here and get started toward building corporate credit.

Things You Should Know About Building Corporate Credit: The Process

Growing corporate credit is a process, and it does not happen without effort. A small business will need to actively work to build corporate credit.

Nevertheless, it can be done easily and quickly, and it is much faster than establishing individual credit scores.

Merchants are a big aspect of this process.

Carrying out the steps out of order will cause repetitive rejections. Nobody can start at the top with corporate credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Things You Should Know About Building Corporate Credit: Company Fundability

A small business needs to be fundable to lending institutions and vendors.

For that reason, a business will need a professional-looking website and e-mail address. And it needs to have website hosting bought from a supplier such as GoDaddy.

Additionally, company telephone and fax numbers must have a listing on 411.com.

Likewise, the company telephone number should be toll-free (800 exchange or the equivalent).

A small business will also need a bank account devoted purely to it, and it has to have every one of the licenses essential for operation.

Licenses

These licenses all have to be in the precise, correct name of the business. And they need to have the same business address and telephone numbers.

So bear in mind, that this means not just state licenses, but possibly also city licenses.

Learn more here and get started toward building corporate credit.

Things You Should Know About Building Corporate Credit: Working with the IRS

Visit the Internal Revenue Service web site and acquire an EIN for the business. They’re totally free. Choose a business entity like corporation, LLC, etc.

A small business can begin as a sole proprietor. But they will probably wish to change to a form of corporation or an LLC.

This is in order to diminish risk. And it will maximize tax benefits.

A business entity will matter when it pertains to tax obligations and liability in case of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and taxes. No one else is responsible.

Sole Proprietors Take Note

If you run a company as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the small business name. As a result, you can find yourself being directly responsible for all company financial obligations.

Plus, per the Internal Revenue Service, by having this structure there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 possibility for corporations! Prevent confusion and considerably lower the odds of an Internal Revenue Service audit at the same time.

Things You Should Know About Building Corporate Credit: Starting Off the Corporate Credit Reporting Process

Begin at the D&B web site and obtain a cost-free D-U-N-S number. A D-U-N-S number is how D&B gets a small business in their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s web sites for the business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

In this way, Experian and Equifax will have something to report on.

Vendor Credit Tier

First you ought to build trade lines that report. This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a corporate credit score.

And with an established corporate credit profile and score you can start to get credit in the retail and cash credit tiers.

These varieties of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are ordinarily Net 30, instead of revolving.

So, if you get an approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Learn more here and get started toward building corporate credit.

Details

Net 30 accounts need to be paid in full within 30 days. 60 accounts must be paid fully within 60 days. In contrast to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you made use of.

To begin your corporate credit profile the proper way, you should get approval for vendor accounts that report to the corporate credit reporting agencies. As soon as that’s done, you can then make use of the credit.

Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Helps

Not every vendor can help like true starter credit can. These are vendors that will grant an approval with negligible effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than one time to these vendors. So, this is to verify you are reliable and will pay on time.

Uline Shipping Supplies

Uline Shipping Supplies is a true starter vendor. You can find them online at www.uline.com. They offer shipping, packing, and industrial supplies, and they report to D&B.

You need to have a D-U-N-S number. They will ask for 2 references and a bank reference. The initial few orders may need to be prepaid to initially get approval for Net 30 terms.

Quill

Quill is an additional true starter vendor. You can find them online at www.quill.com. They sell office, packaging, and cleaning supplies, and they report to D&B and Experian.

Since Quill reports to two separate credit reporting agencies, you get two credit experiences with them. Place an initial order first unless the D&B score is established.

Generally they will put you on a 90-day prepayment schedule. If you order items every month for 3 months, they will normally approve you for a Net 30 Account.

Grainger Industrial Supply

Grainger Industrial Supply is likewise a true starter vendor. You can find them online at www.grainger.com. They sell safety equipment, plumbing supplies, and more, and they report to D&B. You will need a business license, EIN, and a D-U-N-S number.

For less than a $1000 credit limit they will approve almost anyone with a business license.

Accounts That Don’t Report

Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to a minimum of one of the CRAs, a trade account which does not report can nevertheless be of some value.

You can always ask non-reporting accounts for trade references. Additionally credit accounts of any sort should help you to better even out business expenses, thereby making financial planning less complicated. These are companies like PayPal Credit, T-Mobile, and Best Buy.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are service providers like Office Depot and Staples.

Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

One good example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or higher.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are companies such as BP and Conoco. Use this credit to purchase fuel, and to fix, and take care of vehicles. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or more and a 411 small business telephone listing.

Shell may say they want a certain amount of time in business or revenue. But if you already have enough vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building corporate credit.

Cash Credit Tier

Have you been responsibly managing the credit you’ve gotten up to this point? Then move to the cash credit tier. These are companies such as Visa and MasterCard. Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They need to see a PAYDEX Score of 78 or better. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

In addition, they want you to have an established small business.

These are companies such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are frequently MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.

Things You Should Know About Building Corporate Credit: Monitor Your Corporate Credit

One of the things you should know about building corporate credit is happening with your credit. Make certain it is being reported and attend to any inaccuracies as soon as possible. Get in the habit of taking a look at credit reports and digging into the details, and not just the scores.

We can help you monitor corporate credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: www.creditsuite.com/monitoring.

At D&B you can monitor at: www.dandb.com/credit-builder. At Experian, you can monitor your account at: www.smartbusinessreports.com/Landing/1217/. And at Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. Experian and Equifax cost about $19.99; D&B ranges from $49.99 to $99.99.

Update Your Record

Update the relevant information if there are inaccuracies or the relevant information is incomplete. At D&B, you can do this at: https://iupdate.dnb.com/iUpdate/viewiUpdateHome.htm. For Experian, go here: www.experian.com/small-business/business-credit-information.jsp. And for Equifax, go here: www.equifax.com/business/small-business.

Things You Should Know About Building Corporate Credit: Fix Your Corporate Credit

So, what’s all this monitoring for? It’s to challenge any errors in your records. Errors in your credit report(s) can be corrected. But the CRAs usually want you to dispute in a particular way.

Get your business’s PAYDEX report at: www.dnb.com/about-us/our-data.html. Get your company’s Experian report at: www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get your Equifax corporate credit report at: www.equifax.com/business/credit-information.

Disputes

Disputing credit report errors usually means you mail a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always send copies and retain the originals.

Fixing credit report inaccuracies also means you specifically itemize any charges you challenge. Make your dispute letter as crystal clear as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you sent in your dispute.

Dispute your or your business’s Equifax report by following the instructions here: www.equifax.com/small-business-faqs/#Dispute-FAQs.

You can dispute mistakes on your or your small business’s Experian report by following the directions here: www.experian.com/small-business/business-credit-information.jsp.

And D&B’s PAYDEX Customer Service phone number is here: www.dandb.com/glossary/paydex.

Things You Should Know About Building Corporate Credit: A Word about Building Corporate Credit

Always use credit smartly! Never borrow beyond what you can pay back. Track balances and deadlines for repayments. Paying punctually and completely will do more to increase corporate credit scores than just about anything else.

Building corporate credit pays off. Great corporate credit scores help a company get loans. Your loan provider knows the company can pay its financial obligations. They know the business is bona fide.

The business’s EIN links to high scores and loan providers won’t feel the need to request a personal guarantee.

Things You Should Know About Building Corporate Credit: Takeaways

Corporate credit is an asset which can help your small business for years to come.

Learn more here and get started toward building corporate credit.

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