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Build Credit with No Credit in a Recession
Published By Janet Gershen-Siegel at October 14th, 2020
Is the novel coronavirus getting you down? Life is on pause – and it looks like we are heading right into a recession. Still, it can be the perfect time to improve your business. Yes, you can build credit with no credit in a recession. Here’s how.
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Learn How to Build Credit with No Credit in a Recession – We Show You How!
Can you build credit with no credit in a recession? It’s admittedly not easy but it’s far from impossible. Patience and creativity are your best friends.
Build Credit with No Credit in a Recession
Company credit is credit in a company’s name. It doesn’t tie to a business owner’s consumer credit, not even if the owner is a sole proprietor and the sole employee of the small business.
Consequently, a business owner’s business and individual credit scores can be very different.
Build Credit with No Credit in a Recession: The Advantages
Since business credit is independent from individual, it helps to safeguard a small business owner’s personal assets, in case of court action or business bankruptcy.
Also, with two separate credit scores, a business owner can get two separate cards from the same vendor. This effectively doubles purchasing power.
Another advantage is that even new ventures can do this. Going to a bank for a business loan can be a formula for frustration. But building company credit, when done right, is a plan for success.
Consumer credit scores are dependent on payments but also additional considerations like credit usage percentages.
But for small business credit, the scores really just depend on whether a small business pays its bills punctually.
Build Credit with No Credit in a Recession: The Process
Growing company credit is a process, and it does not happen without effort. A small business must actively work to build business credit.
Having said that, it can be done readily and quickly, and it is much quicker than developing individual credit scores.
Vendors are a big component of this process.
Doing the steps out of sequence will lead to repetitive denials. Nobody can start at the top with company credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.
Build Credit with No Credit in a Recession: Start with Company Fundability
A small business has to be fundable to lenders and vendors.
For this reason, a company will need a professional-looking website and email address. And it needs to have website hosting from a merchant like GoDaddy.
Also, company telephone numbers need to have a listing on ListYourself.net.
Additionally, the company phone number should be toll-free (800 exchange or the like).
A small business will also need a bank account devoted purely to it, and it must have every one of the licenses necessary for running.
Licenses
These licenses all must be in the correct, accurate name of the business. And they need to have the same company address and phone numbers.
So note, that this means not just state licenses, but potentially also city licenses.
Learn more here and get started toward growing company credit. Get money even in a recession!
Build Credit with No Credit in a Recession and Deal with the IRS
Visit the Internal Revenue Service web site and get an EIN for the company. They’re free. Select a business entity like corporation, LLC, etc.
A business may get started as a sole proprietor. But they absolutely need to switch to a variety of corporation or an LLC.
This is to diminish risk. And it will make best use of tax benefits.
A business entity matters when it comes to taxes and liability in the event of litigation. A sole proprietorship means the owner is it when it comes to liability and taxes. Nobody else is responsible.
The best thing to do is to incorporate. You should only look at a DBA as an interim step on the way to incorporation.
Build Credit with No Credit in a Recession: Getting Started
Start at the D&B web site and get a cost-free D-U-N-S number. A D-U-N-S number is how D&B gets a 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 web sites for the company. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.
In this manner, Experian and Equifax will have activity to report on.
Starter Vendor Credit
First you must build tradelines that report. 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 begin to get credit for numerous purposes, and from all sorts of places.
These sorts of accounts have the tendency to be for things bought all the time, like marketing materials, shipping boxes, outdoor workwear, ink and toner, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are ordinarily Net 30, versus 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, like within 30 days on a Net 30 account.
Details
Net 30 accounts must be paid in full within 30 days. 60 accounts have to be paid fully within 60 days. In contrast to revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.
To begin your business credit profile the proper way, you need to get approval for vendor accounts that report to the business credit reporting agencies. When that’s done, you can then use the credit.
Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Vendor Credit – It Helps
Not every vendor can help like true starter credit can. These are vendors that grant approval with nominal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
As you get starter credit, you can also start to get credit from retailers. This is to continue to verify you are responsible and pay in a timely manner. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/
Uline
Uline 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 and Experian. You MUST have a D-U-N-S number and an EIN before starting with them. They will ask for your business bank information. Your business address must be uniform everywhere. You need for an order to be $50 or more before they’ll report it. Your first few orders may need to be prepaid initially so your company can get approval for Net 30 terms.
- How to apply with them:
- Add an item to your shopping cart
- Go to checkout
- Select to Open an Account
- Select to be invoiced
Quill
Quill is another true starter vendor. You can find them online at www.quill.com. They sell office, packaging, and cleaning supplies. And they also sell toner, office furniture, and even shipping and school supplies. They report to Dun and Bradstreet every quarter.
To apply, you MUST have a D&B PAYDEX score. If not given a Net 30 they will ask you to do prepaid orders of $100.00. Normally any prepaid order won’t report but you would need them to have given you a Net 30 account. Net 30 accounts require $50.00 purchase to report.
New business or businesses with no credit history may need to prepay purchases until Net 30 approval. Terms are Net 30.
- Here’s how to qualify:
- Your business entity must be in good standing with the applicable Secretary of State
- You must have an EIN and a D-U-N-S number
- Business address (it has to match everywhere)
- Business license (if applicable)
- A business bank account
Apply online or over the phone.
Grainger Industrial Supply
Grainger Industrial Supply is likewise a true starter vendor. You can find them online at www.grainger.com. They sell hardware, power tools, pumps and more. They also do fleet maintenance. And they report to D&B. You need a business license, EIN, and a D-U-N-S number.
- To qualify, you need the following:
- A business license (if applicable)
- An EIN number
- A company address matching everywhere
- A business bank account
- A D-U-N-S number from Dun & Bradstreet
Your corporate entity must be in good standing with the applicable Secretary of State. If your company does not have established credit, they will require additional documents. So, these are items like accounts payable, income statement, balance sheets, and the like.
Apply online or over the phone.
Accounts That Don’t Report
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 still be of some worth.
You can always ask non-reporting accounts for trade references. Also, credit accounts of any sort should help you to better even out business expenditures, consequently making financial planning easier.
Store Credit
Store credit comes from a variety of retail companies.
You must use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.
Fleet Credit
Fleet credit is from service providers where you can purchase fuel, and fix and take care of vehicles. You must 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.
Learn more here and get started toward growing company credit. Get money even in a recession!
Cash Credit
These are businesses such as Visa and MasterCard. You must use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.
These are frequently MasterCard credit cards.
Learn more here and get started toward growing company credit. Get money even in a recession!
Build Credit with No Credit in a Recession and Monitor Your Business Credit
Know what is happening with your credit. Make sure it is being reported and attend to any inaccuracies as soon as possible. Get in the practice of checking credit reports. Dig into the particulars, not just the scores.
We can help you monitor business credit at Experian and D&B for 90% less than it would cost at the business CRAs.
At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business.
Update Your Data
Update the details if there are errors 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. So for Equifax, go here: www.equifax.com/business/small-business.
Build Credit with No Credit in a Recession and Fix Your Business Credit
So, what’s all this monitoring for? It’s to dispute any errors in your records. Mistakes 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 business credit report at: www.equifax.com/business/credit-information.
Disputes
Disputing credit report errors normally means you send 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 spell out any charges you challenge. Make your dispute letter as understandable 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 small business’s Equifax report by following the instructions here: www.equifax.com/small-business-faqs/#Dispute-FAQs.
You can dispute inaccuracies on your or your company’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.
A Word about How to Build Credit with No Credit in a Recession
Always use credit responsibly! Don’t borrow beyond what you can pay back. Keep track of balances and deadlines for repayments. Paying on schedule and fully will do more to raise business credit scores than virtually anything else.
Building business credit pays. Good business credit scores help a company get loans. Your lending institution knows the small business can pay its debts. They recognize the small business is authentic.
The company’s EIN connects to high scores and loan providers won’t feel the need to request a personal guarantee.
Build Credit with No Credit in a Recession: Takeaways
Business credit is an asset which can help your business for many years to come. Learn more here and get started toward establishing small business credit. The COVID-19 situation is not going to last forever.