Published By Janet Gershen-Siegel at August 2nd, 2017
Can you follow the steps to building corporate credit? Do you know where to establish corporate credit, and how? Building and improving your corporate credit isn’t so hard. Get ten easy steps to building corporate credit right here.
And once you understand what is considered a good corporate credit score, then you can work toward making your company’s credit score the best it can be.
If your business does not have one, these are easy to get. You will need to file for a D-U-N-S number via Dun & Bradstreet’s website. The number is free. The D-U-N-S number is necessary to get you into D & B’s system – which leads me to #2.
They each have slightly different ways how a business score is calculated. But right now, all you want to do is request your corporate credit reports. You can do so by clicking on the above links. They all get started with the D-U-N-S number, so get that first.
In case you’re wondering what is considered a good corporate credit score, it is:
If you’ve ever wondered, how does a corporate credit score work, part of that has to do with how quickly and thoroughly your business pays its bills. So if any of your credit reports are incorrect, you will need to formally dispute that. You can do so by providing receipts with a formal dispute.
The various agencies have slightly different means of doing this. However, they all require a written dispute and they all want to see copies of your receipts. Always be sure to keep the originals!
You need to itemize and be specific about what is wrong.
That is, if you have a bill for five separate articles and the credit reporting agency thinks you only paid for two of them, you will need to spell out exactly which line items you are showing receipts for.
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.
Disputing credit report errors generally means you mail a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always send copies and retain the originals.
Fixing credit report mistakes also means you specifically detail any charges you challenge. Make your dispute letter as crystal clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you sent in your dispute.
You can dispute your company’s Equifax report here. Dispute your Experian report by following the directions here. And you can find D & B’s PAYDEX Customer Service phone number here. Stay on top of these as a priority because they are easy to fix and the fix will ripple through your scores.
When your name stays on the bills, credit reporting agencies won’t see your business developing a good payment history. And when you keep using your personal credit cards, your business won’t get a chance to pay those debts.
Make everything crystal clear for the credit reporting agencies. And get all business-specific items from the bank where your company does business.
While it may seem easier said than done, building corporate credit means keeping on top of your business’s bills. If you have ten days to pay, make sure you’ve paid by day nine, or day ten at the latest, and not day eleven.
If that is not possible, then you are going to have to try to find ways to be more responsible with corporate credit.
This can sometimes mean scaling back ambitions and borrowing less. It can also mean paying closer attention to risk.
For example, if your business depends on pistachio nuts, it might be directly affected by the political situation in the Middle East, given that so much of the pistachio crop is grown there.
Credit utilization, as you might expect, is the credit you’re using as a percentage of your total available credit. In general, credit reporting agencies do not want to see this percentage go above about 30%.
The good news is that reducing your credit utilization should also directly improve #4 (improving your payment history).
Use a service like AnnualCreditReport.com to get your credit report from Transunion (they monitor personal credit only), Equifax, and Experian. Why? Because, particularly for very small or very new businesses (and it goes double for corporations which fit both criteria), the big credit reporting agencies will sometimes look at personal and corporate credit together.
So you will need to stay on top of mortgage payments, student loan payments, car loan payments, and the like.
Personal bankruptcy will also affect your personal credit score which, in turn, will affect your corporate credit scores.
Corporate credit is credit in a business’s name. It doesn’t connect to a business owner’s individual credit, not even when the owner is a sole proprietor and the only employee of the small business.
Accordingly, a business owner’s business and personal credit scores can be very different.
And for corporate credit, the scores really only depend on if a company pays its invoices on time.
Learn more here and get started toward building corporate credit.
Building corporate credit is a process, and it does not occur without effort. A business needs to actively work to establish corporate credit.
That being said, it can be done readily and quickly, and it is much more efficient than establishing consumer credit scores.
Vendors are a big aspect of this process.
Undertaking the steps out of order will result in repetitive denials. Nobody can start at the top with corporate credit. For example, you can’t start with store or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.
A business needs to be reputable to lenders and merchants.
Due to this fact, a company will need a professional-looking website and e-mail address. And it needs to have site hosting from a vendor like GoDaddy.
Also, company telephone and fax numbers ought to have a listing on 411.com.
Additionally, the business phone 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 must have all of the licenses essential for operation.
These licenses all have to be in the accurate, accurate name of the small business. And they need to have the same business address and phone numbers.
So keep in mind, that this means not just state licenses, but possibly also city licenses.
Learn more here and get started for building corporate credit.
Visit the Internal Revenue Service web site and acquire an EIN for the small business. They’re free. Select a business entity like corporation, LLC, etc.
A small business can begin as a sole proprietor. But they will more than likely wish to change to a form of corporation or partnership.
This is in order to diminish risk. And it will optimize tax benefits.
A business entity will matter when it comes to tax obligations and liability in case of litigation. A sole proprietorship means the owner is it when it comes to liability and taxes. Nobody else is responsible.
If you operate a company as a sole proprietor, then at 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 personally responsible for all business debts.
Plus, according to the IRS, using this arrangement there is a 1 in 7 possibility of an IRS audit. There is a 1 in 50 chance for corporations! Prevent confusion and significantly reduce the odds of an Internal Revenue Service audit as well.
Kicking 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 into 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 sites for the company. 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 activity to report on.
First you ought to build trade lines that report. This is also called 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 begin getting retail store and cash credit.
These types of accounts have the tendency to be for the things bought all the time, like coffee, 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 starter credit when you have none now. Terms are often Net 30, rather than revolving.
Therefore, if you get approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, like within 30 days on a Net 30 account.
Learn more here and get started toward building corporate credit.
Net 30 accounts need to be paid in full within 30 days. 60 accounts have to be paid completely within 60 days. Unlike with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.
To kick off your corporate credit profile the right way, you need to get approval for vendor accounts that report to the corporate credit reporting agencies. As soon as that’s done, you can then use the credit.
Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Not every vendor can help like true starter credit can. These are merchants that will grant an approval with hardly any 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 once to these vendors, and you may need to buy some items you do not need to have. So, this is to demonstrate you are dependable and will pay in a timely manner.
Consider donating unwanted things to charitable organizations.
Uline Shipping Supplies is a true starter vendor. You can find them online at www.uline.com. They sell shipping, packing, and industrial supplies, and they report to D&B.
You must have a D-U-N-S number. They will ask for 2 references and a bank reference. The first few orders may need to be prepaid to first get approval for Net 30 terms. Also, you may have to buy some things you don’t need.
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.
Because Quill reports to two separate credit reporting bureaus, you get two credit experiences with them. Place an initial order first unless the D&B score is established.
Usually they will put you on a 90-day prepayment schedule. If you order items monthly for 3 months, they will generally approve you for a Net 30 Account.
Grainger Industrial Supply is also 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 to have a business license, EIN, and a D-U-N-S number.
For under a $1000 credit limit they will approve nearly anybody with a business license.
Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to at the very least one of the CRAs, a trade account which does not report can yet be of some value.
You can always ask non-reporting accounts for trade references. Plus credit accounts of any sort ought to help you to better even out business expenditures, thus making financial planning easier. These are providers like PayPal Credit, T-Mobile, and Best Buy.
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are companies which include Office Depot and Staples. These companies are likelier to have goods you need.
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.
Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are service providers such as BP and Conoco. Use this credit to buy, repair, and take care of vehicles. Make certain to apply using the small business’s EIN.
One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or higher and a 411 company phone listing.
Shell may say they want a specific amount of time in business or profits. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get an approval.
Learn more here and get started with building corporate credit.
Have you been responsibly managing the credit you’ve up to this point? Then move to the cash credit tier. These are service providers such as Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.
One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They need to see a PAYDEX Score of 78 or higher. 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 like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are commonly MasterCard credit cards. If you have 14 trade accounts reporting, then these are attainable.
Know what is happening with your credit. Make sure it is being reported and deal with any inaccuracies as soon as possible. Get in the habit of taking a look at credit reports and digging into the particulars, and not just the scores.
We can help you monitor corporate credit at Experian and D&B for only $24/month. See: www.creditsuite.com/business-credit-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 the relevant information if there are inaccuracies or the 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.
Always use credit responsibly! Don’t borrow beyond what you can pay off. Keep an eye on balances and deadlines for payments. Paying promptly and in full will do more to elevate corporate credit scores than pretty much anything else.
Growing corporate credit pays. Great corporate credit scores help a business get loans. Your credit issuer knows the business can pay its financial obligations. They know the business is bona fide.
The company’s EIN connects to high scores and lenders won’t feel the need to ask for a personal guarantee.
Corporate credit is an asset which can help your company in years to come.
And, be patient! Much like Rome, corporate credit can’t be built in a day.
Check out how this will help your company with building corporate credit.