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Build Your Business Credit the Foolproof Way

Published By Janet Gershen-Siegel at December 4th, 2017

You Can Build Your Business Credit – Reliably!

When you build your business credit, it means that your firm attains opportunities you never assumed you would. You can get all new equipment, bid on buildings, and cover the company payroll. And you can do this even when times are a bit lean. This is especially helpful in holiday businesses, where you can go for several months with simply nominal sales.

As a result of this, you should really tackle building your business credit. Improve and maintain your scores and you will have these opportunities. Do not, and either you do not get these business opportunities, or they will cost you a lot more. And no company owner wants that.

You have to know what affects your company credit before you can make it better.

Build Your Business Credit: Credit History Length Matters

This is essentially the length of time your small business has been using business credit. Naturally newer small businesses will have short credit histories. While there is not so much you can specifically do about that, do not fret. Credit reporting bureaus will also assess your personal credit score and your very own background of payments.

If your personal credit is excellent, and especially if you have a somewhat extensive credit history, then your personal credit can come to the rescue of your company. That is, you did not just get your first credit card fairly recently.

Naturally the opposite is also true. Hence, if your individual credit history is bad, then it will affect your business credit scores until your business and consumer credit can be separated.

Build Your Business Credit: Your Payment History is Important

Late repayments will impact your company credit score for a good seven years. If you pay your company (and personal) financial obligations off, as quickly as possible and as fully as possible, know what happens? You can make a very real difference when it pertains to your credit scores.

Make sure to pay timely and you will experience the rewards of punctuality.

Build Your Business Credit: Your Personal Credit Can Affect Your Business Credit

Are you having a dissatisfactory business year? Then it could wind up on your personal credit score. And in case your firm has not been around for too long, it will directly impact your business credit. Having said that, you can separate them both by taking measures to unlink them.

Say, you can get credit cards solely for your company. Or you could open up business checking accounts and various other bank accounts (or maybe get a business loan). And then the credit reporting bureaus will start to address your consumer and business credit separately. Also, make sure to incorporate, or at the very least file a DBA (doing business as) status.

You can also pay for your company’s debts with your small business credit card or checking account. And make certain it is the small business’s name on the bill and not your own.

Build Your Business Credit: Do not Let Your Credit Utilization Rate Hurt Your Company

Your credit utilization rate just means the amount of cash you have on credit. So, it is then divided by your total available credit. Lenders generally speaking do not wish to see this exceed 30%. Hence, for each $100 in credit, do not borrow on more than $30 of that.

If this percentage is climbing, you’ll need to spend down and repay your debts ahead of borrowing more.

Build Your Business Credit: The Credit Reporting Bureaus Can Just Plain Get It Wrong

Just like every company around, credit reporting bureaus such as Equifax and Experian are only as good as their records. If your business’s name resembles another’s, or your name is a lot like another company owner’s, there can possibly be some mistakes. So monitor those reports, and your business report at Dun & Bradstreet, PAYDEX.

Stay on top of these reports and dispute charges with records and transparent communications. Do not just allow them to stay incorrect! You can repair this! And while you’re at, it you should also be monitoring the credit reporting agency which just handles personal and not business credit. So, that is TransUnion. If you do not know exactly how to pull a credit report, do not worry. It’s simple.

Build Your Business Credit: The Method

Company credit is credit in a small business’s name. It doesn’t tie to a business owner’s personal credit, not even if the owner is a sole proprietor and the solitary employee of the company.

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

The Advantages

Because company credit is separate from personal, it helps to secure a business owner’s personal assets, in the event of litigation or business insolvency.

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

Another benefit is that even startups can do this. Visiting a bank for a business loan can be a formula for frustration. But building business credit, when done right, is a plan for success.

Personal credit scores rely on payments but also additional elements like credit usage percentages.

But for small business credit, the scores actually only depend on whether a business pays its debts in a timely manner.

Learn more here and get started toward how to build your business credit.

The Process

Establishing company credit is a process, and it does not happen without effort. A company has to actively work to develop company credit.

That being said, it can be done easily and quickly, and it is much swifter than establishing individual credit scores.

Vendors 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 company credit. For instance, you can’t start with store or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Small Business Legitimacy

A company must be reliable to credit issuers and vendors.

Hence, a company will need a professional-looking web site and email address. And it needs to have site hosting from a merchant like GoDaddy.

In addition, business telephone and fax numbers need to have a listing on 411.com.

Also, the company telephone number should be toll-free (800 exchange or comparable).

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

Licenses

These licenses all have to be in the correct, correct name of the business. And they must have the same company address and phone numbers.

So bear in mind, that this means not just state licenses, but potentially also city licenses.

Learn more here and get started with how to build your business credit.

Working with the Internal Revenue Service

Visit the IRS website and obtain an EIN for the small business. They’re free. Choose a business entity such as corporation, LLC, etc.

A business can start off as a sole proprietor. But they will more than likely wish to change to a variety of corporation or partnership.

This is in order to decrease risk. And it will make the most of tax benefits.

A business entity will matter when it involves tax obligations and liability in case of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. Nobody else is responsible.

Sole Proprietors Take Note

If you run a company as a sole proprietor, then at the very 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. Hence, you can wind up being personally responsible for all business financial obligations.

In addition, according to the IRS, by having this structure there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 possibility for corporations! Prevent confusion and dramatically lower the odds of an Internal Revenue Service audit simultaneously.

Starting the Business Credit Reporting Process

Start at the D&B website and get 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 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 way, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you need 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 business credit score.

And with an established business credit profile and score you can begin acquiring retail store and cash credit.

These sorts of accounts often tend to be for the things bought all the time, like coffee, 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 preliminary credit when you have none now. Terms are typically Net 30, instead of revolving.

So, if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Learn more here and get started toward how to build your business credit.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts have to be paid completely within 60 days. In contrast to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you made use of.

To begin your business credit profile properly, 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 repay 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 vendors that will grant an approval with minimal effort. You also want 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, and you may have to buy some things you don’t need to have. So, this is to confirm you are dependable and will pay in a timely manner.

Consider giving unwanted items to charitable organizations.

Uline Shipping Supplies

Uline Shipping Supplies 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.

You must have a D-U-N-S number. They will request 2 references and a bank reference. The initial few orders may need to be paid in advance to first get approval for Net 30 terms. Also, you may have to buy some things you do not need.

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 report to D&B and Experian.

Because Quill reports to two separate credit reporting agencies, you get two credit experiences with them. Place an initial order first unless the D&B score is established.

Typically they will put you on a 90-day prepayment schedule. If you order items monthly for 3 months, they will in most cases approve you for a Net 30 Account.

Grainger Industrial Supply

Grainger Industrial Supply is likewise 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 less than a $1000 credit limit they will approve nearly anyone with a business license.

Accounts That Do Not Report

Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to a minimum of one of the CRAs, a trade account which does not report can nevertheless be of some worth.

You can always ask non-reporting accounts for trade references. And credit accounts of any sort will help you to better even out business expenditures, consequently making budgeting less complicated. These are companies like PayPal Credit, T-Mobile, and Best Buy.

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 businesses which include Office Depot and Staples. These companies are more likely to have products you need.

Use the small business’s EIN on these credit applications.

One instance 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 better.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are businesses like BP and Conoco. Use this credit to purchase, repair, and maintain vehicles. 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 more and a 411 company telephone listing.

Shell might say they want a certain amount of time in business or revenue. But if you already have enough vendor accounts, that won’t be necessary. And you can still get an approval.

Learn more here and get started toward how to build your business credit.

Cash Credit Tier

Have you been responsibly managing the credit you’ve gotten up to this point? Then move onto the cash credit tier. These are businesses like 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).

Plus, they want you to have an established company.

These are companies like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are usually MasterCard credit cards. If you have 14 trade accounts reporting, then these are in reach.

Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and address any mistakes ASAP. Get in the practice of checking credit reports and digging into the particulars, and not just the scores.

We can help you monitor business 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 Your Information

Update the details if there are mistakes or the details 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.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to contest any problems in your records. Mistakes in your credit report(s) can be taken care of. 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 mistakes typically means you mail a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always send copies and keep the original copies.

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

Dispute your or your company’s Equifax report by following the instructions here: www.equifax.com/small-business-faqs/#Dispute-FAQs.

You can dispute inaccuracies on your or your business’s Experian report by following the instructions 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 Building Business Credit

Always use credit responsibly! Don’t borrow beyond what you can pay off. Monitor balances and deadlines for repayments. Paying off punctually and in full will do more to raise business credit scores than pretty much anything else.

Building company credit pays off. Good business credit scores help a company get loans. Your lender knows the company can pay its financial obligations. They understand the small business is authentic.

The small business’s EIN links to high scores and lending institutions won’t feel the need to demand a personal guarantee.

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

Build Your Business Credit: Takeaways

Once you find out what impacts your business credit score, you are that much nearer to creating better business credit.

Today we want to know what you think about how to build business credit.

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