Building business credit

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Building business credit

Published By Janet Gershen-Siegel at March 11, 2018

business setup 1024x480 - Building business credit>

Building business credit means that your small business gets chances you never assumed you would. When you build corporate credit, new doors open.

You can get brand 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 several months with merely low sales.

Given this, you should really focus on building your business credit. Boost and maintain your scores and you will have these chances. 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 have to know what affects your small business credit before you can make it better.

Credit History Length Matters

This is in essence how long your firm has been working with company credit. Obviously newer firms will have short credit histories. Though there is not too much you can specifically do about that, do not panic. Credit reporting agencies will also look into your personal credit score and your record of payments. If your personal credit is good, and particularly if you have a somewhat extensive credit history (that is, you did not just get your very first credit card a short time ago), then your consumer credit can come to the rescue of your company.

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

Your Payment History is Important

Late monthly payments will affect your small business credit score for a good seven years. If you pay your small business (and personal) debts off, as speedily as possible and as fully as possible, then you can make a very real difference when it concerns your credit scores. Make certain to pay promptly and you will experience the rewards of punctuality.

Your Personal Credit can Have an effect on Your Corporate Credit

Are you having an unsatisfactory business year? Then it could land on your individual credit score. And just in case your small business has not been in existence for too long, it will directly influence your company credit. That being said, you can unlink the two by taking measures to separate them. Say, if you get credit cards just for your small business, or you open up business checking accounts and other bank accounts (or maybe get a business loan), then the credit reporting bureaus will start to treat your personal and company credit independently. Also, make sure to incorporate, or at least file a DBA (doing business as) status. You can also pay for your company’s debts with your company credit card or checking account, and make certain it is the company’s name on the bill and not yours.

The Credit Reporting Bureaus Can Get it Wrong

Just the same as every entity around, credit reporting agencies such as Equifax and Experian are only as good as their files. If your company’s name resembles another’s, or your name is a lot like another small business owner’s, there can potentially be some oversights. So check those reports, and your small business report at Dun & Bradstreet, PAYDEX. Stay on top of these reports and question charges with records and crystal clear communications. Do not just let them stay incorrect! You can fix this! And while you’re at, it you should also be monitoring the credit reporting bureau which exclusively handles individual and not business credit, TransUnion. If you do not know the way to pull a credit report, do not worry. It is easy.

Do not Allow Your Credit Utilization Rate to Damage Your Business

Credit utilization rate just shows the amount of cash you have on credit which is then divided by your overall available credit. Lenders normally do not like to see this exceed 30% (so for every $100 in credit, do not borrow on over $30 of that). If this percent is climbing, you’ll have to spend down and pay off your debts ahead of borrowing more.

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

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