Published By Janet Gershen-Siegel at October 30th, 2018
Small business credit cards offer a variety of perks. These can be great rewards and cards with limits that are typically greater than on personal cards.
Plus, there’s an added reward that small business owners don’t always recognize at first. A business credit card might actually help you build business credit.
In fact, obtaining one of these cards may help start your company with building business credit. But that is so long as the card issuer reports to at least one of the major commercial credit agencies.
Not all cards have the same policy when it relates to reporting to business credit agencies, though. So it is necessary to understand how each one works.
The best-known commercial credit reporting agencies in the United States are Dun & Bradstreet, Equifax and Experian.
Credit reporting is a completely voluntary activity. No issuer is required to report data to credit bureaus. And that’s true whether it’s personal or commercial credit data.
So with business credit especially, it can be tough to find lenders and vendors that report. That’s why this kind of information is important.
Right now, American Express, Capital One, Chase, and Citi all report to Dun & Bradstreet. Chase and Citi also report to Experian and Equifax. But Capital One also reports to Experian.
This can change in the future. So make certain to consult a provider if you are uncertain.
If one of your goals is a good business credit rating, then seriously consider getting a business credit card.
Many small business owners think their business must be well-established and financially successful to qualify. But that is not always so.
Card issuers are often more concerned with the personal credit score of the business owner who applies. And they will regularly take into consideration revenue from a myriad of sources. This is not just the business itself.
If you want to establish sound business credit by using a business credit card, see to it you:
Payment history is the most significant factor in personal credit scores. And it might be an even more significant factor with business credit scores. Some business credit scoring models rely almost entirely on payment history.
Business credit reports are different from personal credit reports in many ways. One is that issuers don’t typically report credit limits. Compared to personal credit scores, where debt use is based upon the balance compared to the credit limit, with business credit the balance may be compared with the highest balance reported.
Your business may seem to be “maxed out” more readily this way. Not all commercial credit scoring models will evaluate debt utilization. But when they do, lower balances can be a benefit.
Another manner business credit reports are different than personal credit reports is they do not provide the name of the lender (or card issuer).
As you start to develop business credit, take note of your business credit reports. Make sure to identify when one of these accounts reports. You’ll then be able to track how various accounts impact your credit history.
Know what is happening with your credit. Make sure it is being reported and fix any inaccuracies as soon as possible. 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: https://www.creditsuite.com/business-credit-monitoring.
At D&B you can monitor at: https://www.dandb.com/credit-builder/. And at Experian, you can monitor your account at: https://www.smartbusinessreports.com/Landing/1217/. At Equifax, you can monitor your account at: https://www.equifax.com/business/business-credit-monitor-small-business.
Experian and Equifax are $19.99; D&B ranges from $49.99 to $99.99.
Update the data if there are inaccuracies or the relevant information is incomplete. At D&B, you can do this at: https://iupdate.dnb.com/iUpdate/viewiUpdateHome.htm. At Experian, go to: www.experian.com/small-business/business-credit-information. And at Equifax, go to: https://www.equifax.com/business/small-business.
So, what’s all this monitoring for? It’s to fix business credit inaccuracies in your records. Mistakes in your credit report(s) can be fixed. But the CRAs often want you to dispute in a particular way.
Get your corporation’s PAYDEX report at: https://www.dnb.com/about-us/our-data.html. Get your company’s Experian report at: https://www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get your Equifax business credit report at: https://www.equifax.com/business/credit-information.
Disputing credit report errors commonly means you send a paper letter with duplicates of any proofs of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always mail copies and retain the originals.
Disputing credit report inaccuracies also means you precisely itemize any charges you challenge. Make your dispute letter as understandable as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you mailed in your dispute.
Dispute your or your business’s Equifax report by following the instructions here: https://www.equifax.com/small-business-faqs/#Dispute-FAQs. Dispute inaccuracies on your or your business’s Experian report by following the directions here: www.experian.com/small-business/business-credit-information.
And D&B’s PAYDEX Customer Service telephone number is here: https://www.dandb.com/glossary/paydex/. Dun & Bradstreet wants you to contact their Customer Service Department prior to proceeding.
Here’s another option: using a credit builder business credit card.
Check out the Wells Fargo Business Secured Credit Card. It allows cardholders to get a credit limit of $500 – $25,000. The amount available corresponds to the amount of cash you provide to secure the line.
Your purchase APR rate can be as low as a variable 13.15%. And the annual fee is $25. But the more cards you have, the more expensive your yearly fee is going to be.
This card lets business owners with bad personal credit to acquire a card to make purchases and set up business credit.
But the card will only report to the personal credit bureaus if you default or are behind on payments.
For Fair Credit, we like the Capital One Spark Classic for Business. It has no yearly fee. There are cash-back rewards. But you will have to have a credit score of 690 or better.
But BEAR IN MIND: the standard APR is 23.99% variable APR.
The sheer act of building business credit often brings you into contact with credit card providers. Here are some.
Begin at the D&B website and get a free DUNS number. A DUNS number is how D&B gets a corporation into their system, to produce a PAYDEX score. If there is no DUNS number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s websites for the business. You can do this at https://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. This way, Experian and Equifax will have activity to report on.
Start with the vendor credit tier. First you should establish trade lines that report. This is also known as vendor accounts. 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 store and cash credit.
These kinds of accounts 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 starter credit when you have none now. Terms are frequently Net 30, instead of revolving.
Hence 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.
Net 30 accounts must be paid in full within 30 days. 60 accounts must be paid fully 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 kick off your business credit profile the right way, you should get approval for vendor accounts that report to the business credit reporting agencies. As soon as 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.
Not every vendor can help like true starter credit can. These are vendors that will grant an approval with marginal effort. You also need 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 once to these vendors, and you may need to purchase some things you do not need, to prove you are dependable and will pay in a timely manner.
Consider donating unwanted items to charitable organizations.
Uline Shipping Supplies is a true starter vendor. Find them online at https://www.uline.com/. They sell shipping, packing, and industrial supplies, and they report to D&B.
You must have a DUNS number. They will request 2 references and a bank reference. The initial few orders may need to be paid in advance to initially get approval for Net 30 terms. Also, you may need to buy some items you don’t need.
Check out starter vendor Marathon. Marathon Petroleum Company provides transportation fuels, asphalt, and specialty products throughout the United States. Their comprehensive product line supports commercial, industrial, and retail operations. This card reports to Dun & Bradstreet, Experian, and Equifax. Before applying for multiple accounts with WEX Fleet cards, make sure to have enough time in between applying so they don’t red-flag your account for fraud.
Your SSN is required for informational purposes. If concerned they will pull your personal credit talk to their credit department before applying. You can give a $500 deposit instead of using a personal guarantee, if in business less than a year. Apply online. Terms are Net 15. Get it here: www.marathonbrand.com.
Grainger Industrial Supply is likewise a true starter vendor. Find them online at https://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 DUNS number.
For less than $1000 credit limit they will approve almost any person with a business license.
Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to at 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. And also credit accounts of any sort should help you to better even out business expenses. So this consequently makes budgeting easier.
These are companies like PayPal Credit, T-Mobile, and Best Buy.
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs move to the retail credit tier. These are service providers such as Office Depot and Staples. These companies are more likely to have products you need.
Use the business’s EIN on these credit applications.
One example is Lowe’s. They report to D&B, Equifax and Business Experian. They want to see a DUNS and a PAYDEX score of 78 or more.
Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are companies such as BP and Conoco. Use this credit to purchase, repair, and take care of vehicles. Make certain to apply using the corporation’s EIN.
But if you already have adequate vendor accounts, that won’t be necessary. And you can still get approval.
Have you been sensibly handling 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.
These are service providers such as Walmart and Dell, and also Home Depot, BP, and Racetrac.
They are often MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.
Not all business credit cards report to the credit reporting agencies.
For those that do, then using them can help your small business grow in more ways than one. Check out how this will help your company get business credit cards.