Credit Suite Blog

Get current information on getting credit and loans to grow your business

CLICK HERE TO LEARN MORE

Build Credit with No Credit in a Recession

Published By Janet Gershen-Siegel at October 14th, 2020

Build Credit with No Credit in a Recession

Learn How to Build Credit with No Credit in a Recession – We Show You How!

Is the novel coronavirus getting you down? Life is on pause – and it looks like we’re 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.

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.

build credit with no credit in a recession Credit Suite2 - Build Credit with No Credit in a Recession

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.

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.

1231766  Content Updated CklistRec Bk Banner op1 120721 min - Build Credit with No Credit 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 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. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/

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.

1231766  Content Updated CklistRec Bk Banner op1 120721 min - Build Credit with No Credit 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, Equifax, and D&B for 90% less than it would cost at the business CRAs.

Update Your Data

Update the details if there are errors or the information is incomplete.

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.

Disputes

Disputing credit report errors normally means you specifically spell out any charges you challenge.

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.

1231766  Content Updated CklistRec Bk Banner op1 120721 min - Build Credit with No Credit in a Recession

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.

Leave a Reply

Your email address will not be published.