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Being a Business Credit Builder

Published By Janet Gershen-Siegel at July 6th, 2018

Get on the Road to Being a Business Credit Builder

Are you an effective business credit builder? Being a business credit builder means your small business gets opportunities you never thought you would.

Are you an effective business credit builder? Being a business credit builder means your small business gets opportunities you never thought you would.

You can get all-new equipment, bid on real property, and cover the company payroll. You can do so even when times are a bit lean. This is specifically helpful in holiday business enterprises, where you can go for several months with only minimal sales.
Given this, you ought to focus on developing your corporate credit. Boost and maintain your scores and you will have these possibilities. Do not, and either you do not get these chances, or they will cost you a lot more. And no business owner wants that.

You Can Start Being a Business Credit Builder For Any Kind of Business

Small business credit is credit in a business’s name. It doesn’t connect to a business owner’s personal credit, not even when the owner is a sole proprietor and the solitary employee of the company.

As such, a business owner’s business and personal credit scores can be very different.

The Benefits

Because company credit is distinct from individual, it helps to safeguard a small business owner’s personal assets, in the event of a lawsuit or business bankruptcy.

Also, with two distinct credit scores, a small business owner can get two different cards from the same vendor. This effectively doubles purchasing power.

Another advantage is that even startup businesses can do this. Going to a bank for a business loan can be a recipe for frustration. But building business credit, when done properly, is a plan for success.

Consumer credit scores rely on payments but also various other elements like credit usage percentages.

But for small business credit, the scores really just depend on whether a small business pays its invoices promptly.

Being a Business Credit Builder

Learn more here and get started toward being a business credit builder.

The Process

Building company credit is a process, and it does not happen automatically. A business must actively work to develop business credit.

Nonetheless, it can be done easily and quickly, and it is much more rapid than developing personal credit scores.

Merchants are a big aspect of this process.
Carrying out the steps out of sequence will lead to repetitive rejections. No one can start at the top with business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Being a Business Credit Builder Means Establishing Business Fundability

A business has to be fundable to credit issuers and merchants.

Due to this fact, a business will need a professional-looking web site and email address. And it needs to have site hosting from a vendor like GoDaddy.
Plus, company telephone and fax numbers must have a listing on 411.com.

At the same time, the company phone number should be toll-free (800 exchange or the like).

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

Licenses

These licenses all have to be in the particular, accurate name of the business. And they need to have the same business address and phone numbers.

So note, that this means not just state licenses, but possibly also city licenses.

Being a Business Credit Builder Means Dealing with the Internal Revenue Service

Visit the IRS website and get an EIN for the business. They’re free of charge. Select a business entity like corporation, LLC, etc.

A business can begin as a sole proprietor. But they will most likely want to switch to a kind of corporation or an LLC.

This is in order to decrease 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 tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you run 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. Because of this, you can wind up being directly responsible for all business financial obligations.

In addition, per the Internal Revenue Service, with this structure there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 probability for corporations! Steer clear of confusion and significantly lower the odds of an IRS audit simultaneously.

Being a Business Credit Builder

Learn more here and get started toward being a business credit builder.

Kicking Off Being a Business Credit Builder

Start at the D&B website and get a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a 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 websites 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.
By doing this, Experian and Equifax will have activity to report on.

Vendor Credit Tier

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

And with an established business 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 to start with, what is trade credit? These trade lines are credit issuers who will give you initial 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.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts must be paid in full within 60 days. Unlike with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you used.

To launch your business credit profile the right way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. When that’s done, you can then make use of the credit.

Then pay back 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 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 need to apply more than one time to these vendors. So, this is to prove you are responsible and will pay on time.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then progress to the retail credit tier. These are service providers such as 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 company’s EIN on these credit applications.

One such 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 more.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are service providers such as BP and Conoco. Use this credit to buy fuel, and to repair, and maintain vehicles. Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the company’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 small business phone listing.

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

Cash Credit Tier

Have you been sensibly managing the credit you’ve up to this point? Then progress to the cash credit tier. These are businesses such as Visa and MasterCard. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want 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).

Additionally, they want you to have an established company.

These are service providers such as 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 doable.

Being a Business Credit Builder

Learn more here and get started toward being a business credit builder.

Being a Business Credit Builder Means You Need to Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and fix any mistakes as soon as possible. Get in the practice of taking a look at credit reports and digging into the specifics, and not just the scores.

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

Update Your Information

Update the information if there are mistakes or the information is incomplete.

Being a Business Credit Builder Means You Need to Fix Your Business Credit

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

Disputes

Disputing credit report inaccuracies usually means you mail a paper letter with duplicates of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always mail copies and keep the originals.

Fixing credit report errors also means you specifically detail any charges you contest. Make your dispute letter as clear as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you mailed in your dispute.

A Word about Being a Business Credit Builder

Always use credit sensibly! Don’t borrow beyond what you can pay back. Track balances and deadlines for repayments. Paying off promptly and in full will do more to raise business credit scores than almost anything else.

Establishing company credit pays off. Good business credit scores help a company get loans. Your lending institution knows the company can pay its financial obligations. They understand the small business is for real.

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

Business credit is an asset which can help your company for years to come.

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