You probably know why you need tradelines on your business credit reports. However, there is a right way and a wrong way to get them there.
Paying for tradelines can hurt more than it helps. Here’s a list of 6 business tradelines you can add to your report for free!
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5 Business Tradelines You Don’t Have to Pay For
1. Newegg Business
If you need computers or other electronics, this is the place to start. Newegg Business offers a tradeline you can use to purchase tons of electronic products.
There is something that pretty much any business can use.
To open a tradeline with net 30 terms, you’ll need a DUNS number and a bank reference. Net 30 accounts range from $500 to $1,000, and they report to Dun & Bradstreet.
2. Strategic Network Solutions
Strategic Network Solutions sells eBooks, software, and even office supplies. You do have to register to see their products, but the process is fast and easy.
You will have to make a $60 or more initial purchase to be eligible for a net 30 tradeline of up to $2,000. They report to Experian and Credit Safe.
3. Grainger Industrial Supply
Grainger Industrial Supply sells industrial equipment for outdoors as well as standard tools, and more. To gain approval you will need a business license, a DUNS number, and bank reference.
You can get a tradeline with net 30 terms that ranges from $500 to $1,000 and they report to Dun & Bradstreet.
4. Summa Office Supplies
Another office supply provider, you can order anything from paper to staples, pens to printer ink, and pretty much anything you can think of in between from Summa.
They require a $60 initial purchase, and will approve up to $2,000 on net 30 terms. They report to Dun & Bradstreet.
Uline sells a lot of things, but they specialize in packing and shipping equipment and janitorial supplies. You’ll need to place an initial order, and they do ask for a bank reference and two other references.
They report to Dun & Bradstreet, so you’ll of course need a DUNS number too.
If you get approval for a net 30 account with each of these, you could have between $5,000 and $10,000 in accounts reporting to the credit agencies pretty quickly.
Make your payments consistently, and that seed you planted with these easy approval business lines will sprout to the point you will be ready for the next step in building your business credit score before you know it.
What Are Business Tradelines?
The term in question, business tradelines, simply refers to accounts that report your payments to the business credit reporting agencies, or CRAs.
That could be vendor accounts, a business credit card, a secured credit card that reports, or a select few other things. Most often the term refers to a vendor tradeline.
You buy stuff from these vendors using the business line, and they allow you to pay them at a later date. We call this net terms.
It is different from revolving credit, because you have to pay the whole balance by a certain date.
That means they will bill you for the goods or services you buy from them, with the understanding you will pay within a certain amount of time.
Most often, these are net 30 accounts, meaning you have 30 days to pay in full. Occasionally they will extend net 60 or net 90 terms.
Why is it important to have business tradelines?
Help Establish Business Credit Score
Your business credit score is separate from your personal credit score. Your personal credit builds passively as you make credit transactions.
You have to be intentional about building a strong business credit score. Having no business credit score is the same as your business having bad credit.
Also, while virtually all credit providers will report both positive and negative payment history to your personal credit report, not all vendors will report payments to your business credit report.
That means, you need to add tradelines that do report. You’ll likely need help with this from a business credit expert, as most vendors do not make publicly known whether they report or not.
You need tradelines on your business credit report to establish a PAYDEX with Dun & Bradstreet, which is their main credit score.
They are the largest and most commonly used business credit company.
Having a PAYDEX is important. D&B says you only need two tradelines to get one. However, many say that in their experience it took 3 tradelines reporting to establish a PAYDEX.
Raise Your Business Credit Score
Remember, this only works if you pay on-time. However, if you do, the more the merrier.
When you add tradelines to your credit report, and handle them responsibly, you are only helping your business credit score grow.
Some tradelines break the vicious cycle of “you have to have credit to get credit.” These typically do not take credit into account for approval.
Rather, they look at other things to determine credit worthiness like time in business, business revenue, and business bank account balance.
Things You Should Know About Business Tradelines
Knowing what a tradeline is and how to get one isn’t enough.
Not all Business Tradelines are Good for Building Business Credit
Tradelines are only good for building credit if they report your payments to the business CRAs.
That includes Dun & Bradstreet, Experian, and Equifax. There are a few others as well, but these are the big three.
The thing is, not all of them do report payments. They are not required to do so, and many do not.
You have to find those vendors that will report your payments if you are going to use them to build business credit.
Buying Business Tradelines is a Bad Idea
It can seem almost impossible to get business tradelines without credit.
As a result, someone had the idea to create companies, use them to obtain tradelines, then sell the tradelines to anyone with a small business who wanted fast business credit.
Essentially, these are shelf companies that have years’ worth of seasoned tradelines. They market to new business owners as a way to access funding they would not otherwise qualify for.
It sounds great. You pay a lot, but you get the potential access to so much more.
The truth is however, that lenders are not dumb. They caught on to this ruse quickly, and though it is not technically illegal, it is very much frowned upon.
If a lender catches wind of the idea that you may be using business credit that you did not actually build yourself, you could be black balled.
That means, not only would you not be able to get funding for your small business based on the credit you purchased, but it would block you every time you try to build credit on your own.
This sounds like great credit repair, but it is really not a good idea. In the end, you trade credit for the ability to get credit, and that doesn’t typically work out well.
You Can Get Business Tradelines without Already Having Business Credit
It is possible to get trade credit without first having good credit.
If you begin with starter vendors, you can get trade credit without having business credit at all. In fact, even poor credit on your personal report will not matter.
When they start reporting the CRAs, your credit will start to grow on its own without you having to spend a dime other than what you buy from the tradeline vendors that your business needs anyway.
Once you have enough tradelines reporting from these starter vendors, your credit should be strong enough to start applying for credit cards. As you gather more accounts in each tier, you will be able to move on to the next tier.
You Need to Get Business Trade Lines in a Specific Order
If you are using business tradelines to build business credit, you can’t just start applying for business credit cards right away. A credit card company will deny you every single time.
You have to start with establishing tradelines with starter vendors like those listed above.
Too Many or Too Few Tradelines Reporting Can Affect Your Business Credit Score
The problem with this is, pretty much any business credit bureau is going to be tight lipped on where the sweet spot is. That said, your best bet is to open only as many accounts as you need to move on to the next.
Then, only close accounts if you absolutely must.
One thing we do know is that Dun & Bradstreet requires at least three tradelines reporting before it will even calculate a Paydex, which is the score lenders most commonly use. It is the most like the personal FICO score.
What Types of Tradeline Should You Avoid?
Vendor credit and even a business credit card can be great. However, avoid using shortcuts to add tradelines to your report. The top three “shortcuts” to building business credit are:
- Buying tradelines
- CPNs (credit privacy/profile numbers) and
- Buying shelf corporations
For many, purchasing tradelines seems like the easiest and least risky shortcut. It’s a fast and easy way to get a seasoned tradeline, meaning one that has been in use for a while. However, this type of tradelines business might end up causing more problems than it’s worth.
The following organizations agree.
#1 Federal Reserve
“The potential distortions in credit scores that piggybacking credit may introduce suggest that a reconsideration of existing regulations, industry practices, or both may be warranted to preserve the predictiveness of credit scoring models.”
Credit Where None is Due? Authorized User Account Status and “Piggybacking Credit”, Robert B. Avery, Kenneth P. Brevoort, Glenn B. Canner (Federal Reserve Board, March 5, 2010)
# 2 Dun & Bradstreet
According to a Former D&B Employee:
“Opening a business credit account with any company is free. If you are paying for it, you are being ripped off. When the company who sold that tradeline to you gets taken down, all of their clients will get punished, too, with a mound of debt and a cursed credit file that will keep you from getting more credit to be able to pay it off.”
# 3 The FBI
When commenting on a 2013 bust of a fraud ring, “A second kind of tradeline is the “authorized user” tradeline, where a credit card holder adds another, so-called “authorized user,” to a credit card account. This raises the credit score of the authorized user, who inherits some of the primary user’s credit history.
Some defendants created and sold fake lines of credit for false identities made up by other defendants. These fraudulent primary tradelines were then used to increase the credit limits on fraud cards, so that the defendants could reap even larger profits. Defendants used the authorized user tradelines to create new identities.”
FICO’s opinion on piggybacking is obvious here: “A … shadier version of piggybacking has been promoted by some CROs who offer to “rent” to their credit-challenged customers the trade lines of established account holders, in an effort to boost their customers’ credit profiles and scores.”
Equifax: “… authorized user abuse occurs when low-risk primary card owners “rent” their tradelines with extensive credit histories, high credit limits and solid repayment profiles to others – most times, knowingly, to fraudsters.”
Experian: “Buying tradelines may be viewed as deceptive by lenders and credit reporting agencies, and could even put you in danger of committing bank fraud.
Credit scores are designed to help lenders determine a borrower’s creditworthiness, and most use your credit scores and credit reports to determine whether to approve a credit application and what terms you qualify for.
If you pay money to improve your credit scores without doing any of the work or even getting a card to use, you could be falsely representing your creditworthiness to potential lenders.”
CPN (Credit Privacy Number)
Do not use a CPN to get a credit tradeline. This is a number that you can use instead of your Social Security Number or your EIN. While there are legitimate reasons to use one, faking a good credit score is not one of those.
In addition, it is free to get a legitimate CPN, so there is no need to pay for one. Other than that, you may have to pay attorney fees of course.
The idea behind shelf corporations is that a startup, by definition, has little to no time in business. Therefore, a startup often has few, if any, accounts on their credit report.
Instead of building corporate credit the old fashioned way, a small business owner may be tempted to take a short cut in the process by buying what’s called an “aged shelf corporation.”
Many business owners realize they’ll have to spend some money to get their business credit profile off the ground. Instead of giving their money to vendors, they give their money to companies selling shelf corps.
A shelf corporation is a corporation on paper only. It was administratively formed, then ‘put on a shelf’ for several years to age.
This is an expensive way to attempt building credit for your business that may not even work in the end. Not to mention, it isn’t exactly on the up-and-up. A personal guarantee, if it is an option, is better than any of these three shortcuts.
Tradelines are necessary to building a strong business credit history. They are hard to get without already having credit history, but not impossible.
If you set up your business to have Fundability™ and start applying for starter vendors like the ones listed above, you’ll be heading in the right direction the right way.
You can use the credit to manage cash flow, and you’ll be better able to qualify for a business loan as your score grows.