How to Establish a Business Credit Score

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How to Establish a Business Credit Score

Published By Janet Gershen-Siegel at October 25, 2017

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Developing business credit means that your company gets opportunities you never thought you would. You can get new equipment, bid on real estate, and deal with the company payroll, even when times are a bit lean. This is particularly valuable in seasonal operations, where you can go for months with only minimal sales.

Because of this, you should work on establishing your corporate credit. Enhance and maintain your scores and you will have these opportunities. Do not, and either you do not get these opportunities, or they will cost you a lot more. And no entrepreneur wants that. You need to know what influences your business credit before you can make it better.

Credit History Length Matters

This is generally how long your company has been making use of business credit. Of course newer businesses will have brief credit histories. Although there is not too much you can particularly do about that, do not panic. Credit reporting agencies will also consider your personal credit score and your own history of payments. If your personal credit is good, and specifically if you have a fairly long credit history (that is, you did not just get your first credit card not too long ago), then your personal credit can come to the rescue of your corporate.

Of course the opposite is also true– if your personal credit history is bad, then it will impact your business credit scores until your business and personal credit can possibly be split.

Your Payment History Matters

Overdue payments will influence your business credit score for a good seven years. If you pay your business (and personal) debts off, as fast as feasible and as thoroughly as you can, then you can make a very real difference when it relates to your credit scores. Make certain to pay without delay and you will reap the rewards of promptness.

Your Personal Credit can Impact Your Company Credit

Is your business having a not so great year? Then that could end up on your personal credit score. And in the event your business has not been around for too long, it will directly affect your commercial credit. However, you can delink both of them by taking steps to separate them. For example, if you get credit cards just for your company, or you open up business checking accounts and other bank accounts (or even get a business loan), then the credit reporting bureaus will begin to treat your personal and corporate credit separately. Also, make sure to incorporate, or at minimum register a DBA (doing business as) status. You can also pay for your company’s bills with your business credit card or checking account, and make sure it is the business’s name on the bill and not your own.

The Credit Reporting Bureaus Can Get it Wrong

Just the same as every entity out there, credit reporting agencies like Equifax and Experianare only as good as their data. If your company’s title resembles another’s, or your full name is a lot like another business owner’s, there can potentially be some mistakes. So monitor those reports, and your business report at Dun & Bradstreet, PAYDEX. Stay on top of these reports and dispute charges with paperwork and clear communications. Do not just let them stay wrong! You can resolve this! And while you’re at, it you should also be keeping an eye on the credit reporting agency which only handles personal and not corporate credit, TransUnion. If you do not know the way to request a credit report, do not worry. It is simple– just use the above web links.

Do not let Your Credit Utilization Rate Harm Your Company

Credit utilization rate simply means the quantity of cash you have on credit which is then divided by your total available credit. Lenders generally do not want to see this go above 30% (so for every $100 in credit, do not borrow on more than $30 of that). If this percentage is rising, you’ll need to spend down and repay your debts before borrowing more.

Once you know what has a bearing on your small business credit score, you are that much nearer to building better corporate credit.

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