Written by Janet Gershen-Siegel

Do You Need to Fastrack Credit?

Want to fastrack credit?

When you are initially starting to develop corporate credit, your very first step needs to be merchant or trade credit. You want to start excellent credit patterns.

So this is everything from not borrowing too much, to paying off your financial obligations back on schedule, to continuing on good terms with your sources of credit. The absolute most vital thing you can possibly do, which will make the swiftest and biggest beneficial impact, is to pay your debts on schedule or early, and develop a responsible and positive payment history.

Build Credit for Your Business

Corporate credit is credit in a small business’s name. It doesn’t link to an entrepreneur’s personal credit, not even when the owner is a sole proprietor and the only employee of the small business. Thus, an entrepreneur’s business and personal credit scores can be very different.

The Benefits

Considering that corporate credit is distinct from personal, it helps to secure an entrepreneur’s personal assets, in the event of a lawsuit or business bankruptcy. Also, with two separate credit scores, an entrepreneur can get two different cards from the same vendor. This effectively doubles purchasing power.

Another advantage is that even startup businesses can do this. Visiting a bank for a business loan can be a recipe for disappointment. But building business credit, when done right, is a plan for success.

Consumer credit scores are dependent on payments but also additional elements like credit utilization percentages. But for corporate credit, the scores actually just hinge on if a business pays its debts punctually.

The Process

Building small business credit is a process, and it does not happen without effort. A small business must proactively work to establish corporate credit. However, it can be accomplished easily and quickly, and it is much faster than building individual credit scores. Vendors are a big component of this process.

Performing the steps out of order will lead to repetitive denials. No one can start at the top with company credit. For example, you can’t start with store or cash credit from your bank. If you do you’ll get a denial 100% of the time.

Corporate Legitimacy

A business needs to be legitimate to lenders and merchants. Consequently, a small business will need a professional-looking web site and e-mail address, with site hosting from a merchant such as GoDaddy. Also company phone and fax numbers should have a listing on 411.com.

In addition the business telephone number should be toll-free (800 exchange or the equivalent).

A small business will also need a bank account devoted only to it, and it must have all of the licenses necessary for operation. These licenses all have to be in the accurate, appropriate name of the small business, with the same corporate address and telephone numbers. Bear in mind that this means not just state licenses, but possibly also city licenses.

Working with the IRS

Visit the Internal Revenue Service web site and acquire an EIN for the small business. They’re totally free. Pick a business entity like corporation, LLC, etc. A company can get started as a sole proprietor but will more than likely wish to change to a form of corporation or partnership to limit risk and maximize tax benefits.

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

If you run a small business as a sole proprietor at the very least file for a DBA (‘doing business as’) status. If you do not, then your personal name is the same as the business name. Consequently, you can wind up being personally responsible for all small business financial obligations.

And also, per the IRS, by having this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 chance for corporations! Avoid confusion and considerably reduce the chances of an Internal Revenue Service audit simultaneously.

Kicking Off the Business Credit Reporting Process

Begin at the D&B website and obtain a free DUNS number. A DUNS number is how D&B gets a business in 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 web sites for the business. You can do this at https://www.creditsuite.com/reports/ . If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process. By doing this, Experian and Equifax will have something to report on.

Trade Lines

First you ought to 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 obtaining revolving 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 first off, what is trade credit? These trade lines are creditors who will give you initial credit when you have none now. Terms are often Net 30, instead of revolving.

So if you get approval for $1,000 in vendor credit and use all of it, you must 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 must be paid completely within 60 days. Compared 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 the right way, you need to get approval for vendor accounts that report to the business credit reporting bureaus. Once that’s done, you can then use the credit.

Then pay back what you used, and the account is on report.

Not every vendor can help in the same way true starter credit can. These are vendors that will grant an 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.

You may need to apply more than once to these vendors. And you may need to buy some items you don’t need, to confirm you are dependable and will pay in a timely manner.

Consider giving unwanted things to charitable organizations.

Uline Shipping Supplies

Uline Shipping Supplies is a true starter vendor. Find them online at https://www.uline.com/. They offer shipping, packing, and industrial supplies, and they report to D&B.

You have to have a DUNS number. They will ask for 2 references and a bank reference. The first few orders may need to be paid in advance to first get approval for Net 30 terms. Also, you may have to buy some items you do not need.

Quill Office Supplies

Quill Office Supplies is an additional true starter vendor. Find them online at https://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 there is a D&B score. Commonly they’ll 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. 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 a business license, EIN, and a DUNS number. For less than $1000 credit limit they will approve virtually anybody 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 at least one of the CRAs, a trade account which does not report can nonetheless be of some value. You can always ask non-reporting accounts for trade references.

And credit accounts of any sort will help you to better even out business expenses, thus making budgeting easier. These are companies like PayPal Credit, T-Mobile, and Best Buy.

Revolving Store Credit

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, move onto revolving store credit. These are service providers which include Office Depot and Staples. These companies are more likely to have goods you need.

Use the corporation’s EIN on these credit applications.

One good example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a DUNS and a PAYDEX score of 78 or more.

Fleet Credit

Are there 8 to 10 accounts reporting? Then move to fleet credit. These are businesses such as BP and Conoco. Use this credit to purchase, repair, and take care of vehicles. Make certain to apply using the business’s EIN.

Cash Credit

Have you been sensibly managing the credit you’ve gotten up to this point? Then progress to cash credit. These are companies such as Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.

These are companies such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are commonly 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 attend to any errors as soon as possible. Get in the habit of taking a look at credit reports and digging into the details, 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. Update the relevant information if there are mistakes or the information is incomplete.

Contesting Mistakes

So, what’s all this monitoring for? It’s to dispute any inaccuracies in your records. You can correct mistakes in your credit report(s). But the CRAs typically want you to dispute in a particular way.

Disputing credit report inaccuracies generally means you send a paper letter with copies of any evidence of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always mail copies and retain the originals.

Disputing credit report mistakes also means you specifically detail any charges you dispute. Make your dispute letter as crystal clear as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you sent in your dispute.

A Word about When You Fastrack Credit

Always use credit smartly! Don’t borrow more than what you can pay off. Keep an eye on balances and deadlines for payments. Paying off in a timely manner and completely will do more to boost business credit scores than nearly anything else.

Growing small business credit pays off. Great business credit scores help a corporation get loans. Your lender knows the corporation can pay its debts. They understand the corporation is for real. The small business’s EIN links to high scores, and loan providers won’t feel the need to request a personal guarantee.

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

Takeaways

Getting vendor accounts for small business credit means that you are on your way to getting good small business credit. Once you have greater than five vendor accounts and they are all reporting with the bigger business credit agencies, then you can begin attempting to get store credit. These three should quickly get you going.

On time payments will help you fastrack credit like nothing else.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN – and fastrack credit.