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How to Build Corporate Credit Effectively and Be Ferocious in Business

Published By Janet Gershen-Siegel at December 22nd, 2017

Build Corporate Credit Effectively and Smash Your Competition

When you build corporate credit effectively, it means that your company gets opportunities you never knew you would. You can get new equipment, bid on real property, and deal with the company payroll. And you can do so even when times are a bit lean. This is especially helpful in seasonal firms, where you can go for several months with merely nominal sales.

Due to this, you need to work on growing your corporate credit. Improve and maintain your scores and you will have these possibilities. Do not, and either you do not get these chances, or they will cost you a lot more. And no business owner wants that. You need to understand what affects your corporate credit before you can make it better.

Build Corporate Credit Effectively: Credit History Length Matters

This is basically how long your small business has been working with corporate credit. Needless to say newer firms will have short credit histories. Though there is not so much you can specifically do about that, do not panic. Credit reporting agencies will also review your personal credit score and your personal record of payments.

If your individual credit is good, and especially if you have a somewhat lengthy credit history, then your individual credit can come to the rescue of your business. That is, you did not just get your very first credit card recently.

Obviously, the reverse is also true. Hence, if your consumer credit history is bad, then it will have a bearing on your corporate credit scores until your company and consumer credit can be split up.

Build Corporate Credit Effectively: Do not Enable Your Credit Utilization Rate to Damage Your Company

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

If this percent is climbing, you’ll need to spend down. And work off your debts ahead of borrowing more.

Build Corporate Credit Effectively: Your Payment History is Important

Overdue payments will impact your corporate credit score for a good seven years. If you pay your small business (and personal) debts off, as rapidly as possible and as fully as possible, then what happens? You can make a very real difference when it concerns your credit scores.

See to it to pay punctually and you will experience the rewards of punctuality.

Build Corporate Credit Effectively: Your Personal Credit Can Influence Your Corporate Credit

Are you having a bad business year? Then it could end up on your personal credit score. And in the event that your business has not been in existence for too long, it will directly affect your corporate credit. That being said, you can unlink them both by taking measures to split up them.

As an example, if you get credit cards only for your company, or you open up business checking accounts and other bank accounts (or perhaps get a business loan), then guess what? The credit reporting bureaus will start to address your consumer and corporate credit separately. Also, make sure to incorporate, or at least file a DBA (doing business as) status.

You can also take care of your company’s monthly bills with your small business credit card or checking account. And make certain it is the small business’s name on the bill and not yours.

Build Corporate Credit Effectively: The Credit Reporting Bureaus Can Just Plain Get It Wrong

Just the same as every company out there, credit reporting bureaus like Equifax and Experian are only as good as their records. If your company’s name is similar to another’s, or your name is a lot like another small business owner’s, there can possibly be some mistakes. So keep track of those reports, and your business report at Dun & Bradstreet, PAYDEX.

Stay on top of these reports. And question charges with documentation and transparent communications. Do not just allow them to stay wrong! You can fix this! And while you’re at, it you should also be checking the credit reporting agency which solely handles individual and not corporate credit. So, that is TransUnion. If you do not know how you can pull a credit report, do not worry. It’s simple.

Build Corporate Credit Effectively: The Method

Corporate credit is credit in a small business’s name. It doesn’t tie to a business owner’s individual credit, not even if the owner is a sole proprietor and the only employee of the small business.

Accordingly, an entrepreneur’s business and individual credit scores can be very different.

The Benefits

Considering that corporate credit is separate from consumer, it helps to protect a business owner’s personal assets, in the event of litigation or business bankruptcy.

Also, with two separate credit scores, a small business owner can get two different cards from the same vendor. This effectively doubles purchasing power.

Another advantage is that even startup ventures can do this. Going to a bank for a business loan can be a formula for frustration. But building small business credit, when done properly, is a plan for success.

Consumer credit scores depend on payments but also additional factors like credit utilization percentages.

But for small business credit, the scores actually just depend on if a business pays its debts timely.

Learn more here and get started toward growing small business credit.

The Process

Growing corporate credit is a process, and it does not happen automatically. A business must proactively work to develop corporate credit.

That being said, it can be done easily and quickly, and it is much speedier than developing personal credit scores.

Vendors are a big aspect of this process.

Carrying out the steps out of order will cause repetitive rejections. No one can start at the top with small business credit. For example, you can’t start with store or cash credit from your bank. If you do you’ll get a rejection 100% of the time.

Business Legitimacy

A business must be credible to credit issuers and merchants.

That’s why, a small business will need a professional-looking web site and email address. And it needs to have site hosting bought from a vendor such as GoDaddy.
And also, business telephone and fax numbers should have a listing on ListYourself.net.

At the same time, the business telephone number should be toll-free (800 exchange or the equivalent).

A business will also need a bank account devoted only to it, and it must have all of the licenses necessary for operating.

Licenses

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

So note, that this means not just state licenses, but potentially also city licenses.

Learn more here and get started toward building small business credit.

Working with the IRS

Visit the Internal Revenue Service website and get an EIN for the small business. They’re free of charge. Select a business entity such as corporation, LLC, etc.

A small business can begin as a sole proprietor. But they will most likely wish to switch to a form of corporation or partnership.

This is in order to decrease risk. And it will 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.

Sole Proprietors Take Note

If you run a small business as a sole proprietor, then at 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 end up being directly liable for all business financial obligations.

Additionally, per the IRS, using this arrangement there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 chance for corporations! Avoid confusion and significantly reduce the odds of an Internal Revenue Service audit at the same time.

Setting off the Corporate Credit Reporting Process

Begin 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 in 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 websites for the small business. You can do this at 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.

In this manner, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you must build trade lines that report. This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a corporate credit score.

And with an established corporate credit profile and score you can start acquiring retail store and cash credit.

These types 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 starter credit when you have none now. Terms are generally Net 30, rather than revolving.

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

Learn more here and get started toward establishing corporate credit.

Details

Net 30 accounts must be paid in full within 30 days. 60 accounts need to be paid in full within 60 days. Unlike with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.

To start your corporate credit profile properly, you ought to get approval for vendor accounts that report to the corporate credit reporting bureaus. When that’s done, you can then make use of the credit.

Then pay back 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 hardly any 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 have to apply more than one time to these vendors, and you may need to purchase some items you do not need. So, this is to demonstrate you are responsible and will pay promptly.

Consider donating nonessential items to charity.

Uline Shipping Supplies

Uline Shipping Supplies is a true starter vendor. You can find them online at www.uline.com. They sell 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 first few orders might have to be paid in advance to initially get approval for Net 30 terms. Also, you may need to buy some things you don’t 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 developed.

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

Grainger Industrial Supply

Grainger Industrial Supply is also 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 under a $1000 credit limit they will approve nearly anyone with a business license.

Accounts That Don’t 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 yet be of some worth.

You can always ask non-reporting accounts for trade references. Also credit accounts of any sort will help you to better even out business expenditures, thereby making financial planning 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 move onto 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 company’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 D-U-N-S and a PAYDEX score of 78 or higher.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are businesses like BP and Conoco. Use this credit to buy, repair, and maintain vehicles. Make sure to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or more and a 411 business telephone listing.

Shell may claim they want a certain amount of time in business or profits. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building corporate credit.

Cash Credit Tier

Have you been responsibly handling the credit you’ve gotten up to this point? Then move onto the cash credit tier. These are companies like Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want 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 small business.

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

Monitor Your Corporate Credit

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

We can help you monitor corporate credit at Experian and D&B for 90% less than it would cost you at the CRAs. 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 Record

Update the data if there are inaccuracies or the data 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 Corporate Credit

So, what’s all this monitoring for? It’s to contest any mistakes in your records. Errors in your credit report(s) can be corrected. But the CRAs generally 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 corporate credit report at: www.equifax.com/business/credit-information.

Disputes

Disputing credit report mistakes 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 original copies. Always send copies and retain the original copies.

Fixing credit report mistakes also means you specifically spell out any charges you challenge. Make your dispute letter as 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.

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

You can dispute errors on your or your company’s Experian report by following the directions 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 Corporate Credit Building

Always use credit responsibly! Never borrow more than what you can pay off. Monitor balances and deadlines for payments. Paying off on time and in full will do more to increase corporate credit scores than just about anything else.

Building corporate credit pays. Great corporate credit scores help a business get loans. Your lending institution knows the small business can pay its debts. They understand the small business is bona fide.

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

Corporate credit is an asset which can help your business in years to come.

Build Corporate Credit Effectively: Takeaways

Once you recognize what affects your corporate credit score, you are that much nearer to creating improved corporate credit. Learn more here and get started toward building corporate credit.

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