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Build business credit the right way from the start

Published By Janet Gershen-Siegel at January 7th, 2018

When you build business credit, it means that your small business acquires opportunities you never considered you would, making it easier to succeed.

You can get new equipment, bid on real property, and deal with the company payroll, even when times are a bit lean. This is especially helpful in seasonal companies, where you can go for months with only negligible sales.

Given this, you really should focus on growing your company credit. Improve and maintain your scores and you will have these possibilities. Do not, and either you do not get these opportunities, or they will cost you a lot more. And no business owner wants that. You will need to understand what affects your business credit before you can make it better.

Credit History Length Matters

This is basically the length of time your small business has been working with business credit. Certainly newer small businesses will have short credit histories. While there is not a lot you can specifically do about that, do not worry. Credit reporting agencies will also look into your personal credit score and your personal history of payments. If your own personal credit is excellent, and in particular if you have a fairly long credit history (that is, you did not just get your very first credit card not too long ago), then your personal credit can come to the rescue of your business.

Naturally the reverse is also right– if your personal credit history is poor, then it will affect your corporate credit scores until your company and personal credit can be split.

Do not Permit Your Credit Utilization Rate to Damage Your Business

Your credit utilization rate just shows the amount of money you have on credit which is then divided by your total available credit. Lenders generally do not want to see this exceed 30% (so for every $100 in credit, do not borrow on in excess of $30 of that). If this percent is climbing, you’ll need to spend down and satisfy your debts prior to borrowing more.

Your Payment History is Important

Overdue payments will have an effect on your business credit score for a good seven years. If you pay your business (and personal) debts off, as fast 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 punctually and you will enjoy the rewards of punctuality.

Your Personal Credit can Affect Your Corporate Credit

Are you having a dissatisfactory business year? Then it could land on your consumer credit score. And just in case your small business has not been in existence for too long, it will directly affect your company credit. Nonetheless, you can unlink both by taking steps to split up them. As an example, if you get credit cards solely for your business, or you open up business checking accounts and various other bank accounts (or even get a business loan), then the credit reporting agencies will start to treat your private and company credit independently. Also, ensure to incorporate, or at the very least file a DBA (doing business as) status. You can also take care of your company’s debts with your firm credit card or checking account, and insure it is the small business’s full name on the bill and not yours.

The Credit Reporting Bureaus Can Just Plain Get it Wrong

Just Like as every organization out there, credit reporting bureaus like Equifax and Experian are only as good as their data. If your firm’s name is like another’s, or your name is a lot like another company owner’s, there can potentially be some errors. So keep an eye on those reports, and your small business report at Dun & Bradstreet, PAYDEX. Stay on top of these reports and challenge charges with documentation and clear communications. Do not just let them stay wrong! You can correct this! And while you’re at, it you should also be keeping an eye on the credit reporting agency which exclusively handles individual and not small business credit, TransUnion. If you do not know how you can pull a credit report, do not worry. It’s easy.

Once you know what impacts your small business credit score, you are that much nearer to building better corporate credit.

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