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How to Establish Business Credit with Bad Personal Credit

Published By Janet Gershen-Siegel at January 13th, 2018

Do you know how to build business credit with bad personal credit? We can show you how to establish business credit with bad personal credit.

It’s Time to Learn How to Establish Business Credit with Bad Personal Credit

Do you know how to establish business credit with bad personal credit? Here’s how.

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

How to Establish Business Credit with Bad Personal Credit: The Benefits

how to establish business credit with bad personal credit Suite2 - How to Establish Business Credit with Bad Personal CreditConsidering that business credit is distinct from personal, it helps to protect a small business owner’s personal assets, in case of court action or business bankruptcy.Also, with two distinct credit scores, a business owner can get two different cards from the same vendor. This effectively doubles buying power.

Another benefit is that even startups can do this. Going to a bank for a business loan can be a formula for disappointment. But building company credit, when done right, is a plan for success.

Individual credit scores depend upon payments but also additional elements like credit utilization percentages.

But for company credit, the scores really merely hinge on if a company pays its bills in a timely manner.

How to Establish Business Credit with Bad Personal Credit: The Process

Growing business credit is a process, and it does not happen automatically. A business has to actively work to build small business credit.

Having said that, it can be done easily and quickly, and it is much more efficient than developing personal credit scores.

Vendors are a big component of this process.

Carrying out the steps out of sequence will lead to repetitive rejections. Nobody can start at the top with small business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

How to Establish Business Credit with Bad Personal Credit: Small Business Fundability

A small business must be fundable to credit issuers and vendors. For this reason, a small business will need a professional-looking web site and e-mail address.

And it needs to have site hosting from a merchant like GoDaddy. And also, company phone and fax numbers ought to have a listing on 411.com.

Additionally, the business telephone number should be toll-free (800 exchange or similar).

A company will also need a bank account devoted only to it, and it has to have every one of the
licenses essential for running.

Licenses

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

So bear in mind, that this means not just state licenses, but potentially also city licenses.

how to establish business credit with bad personal credit Suite3 - How to Establish Business Credit with Bad Personal Credit

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

How to Establish Business Credit with Bad Personal Credit: Dealing with the IRS

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

A company can start off as a sole proprietor. But they will more than likely want to switch to a variety of corporation or an LLC.

This is in order to reduce risk. And it will make the most of tax benefits.

A business entity will matter when it concerns tax obligations and liability in case of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you run a small business as a sole proprietor, then at the very 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 company name. As a result, you can find yourself being directly liable for all small business financial obligations.

Also, according to the IRS, using this arrangement there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 possibility for corporations! Avoid confusion and noticeably reduce the odds of an Internal Revenue Service audit at the same time.

How to Establish Business Credit with Bad Personal Credit: Setting off the Business Credit Reporting Process

Begin at the D&B website and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a small business in their system, to generate 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 accuracy and completeness. If there are no records with them, go to the next step in the process.

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

Vendor Credit

First you ought to establish trade lines that report. This is also called vendor credit. 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 to get retail and cash credit.

These varieties of accounts have the tendency to be for the things bought all the time, like marketing materials, 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 initial credit when you have none now. Terms are generally Net 30, rather than revolving.

Therefore, if you get 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.

how to establish business credit with bad personal credit Suite3 - How to Establish Business Credit with Bad Personal Credit

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

Details

Net 30 accounts must be paid in full within 30 days. 60 accounts need to 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 begin your business credit profile the proper way, you should get approval for vendor accounts that report to the business credit reporting bureaus. When that’s done, you can then use the credit.

Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit – It Helps

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 3 of these to move onto the next step, which is store credit.

Store Credit

Once there are 3 or more vendor trade accounts reporting to at least one of the CRAs, then progress to store credit. These are service providers like Office Depot and Staples. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

Fleet Credit

Are there more accounts reporting? Then move onto fleet credit. These are businesses like BP and Conoco. Use this credit to buy fuel, and to repair and maintain vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the small business’s EIN.

how to establish business credit with bad personal credit Suite3 - How to Establish Business Credit with Bad Personal Credit

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

Cash Credit

Have you been responsibly handling the credit you’ve gotten up to this point? Then move to  more universal cash credit. These are companies like Visa and MasterCard. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

These are usually MasterCard credit cards. If you have more trade accounts reporting, then these are feasible.

How to Establish Business Credit with Bad Personal Credit: 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 practice of taking a look at credit reports. Dig into the details, not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less.

Update Your Record

Update the relevant information if there are mistakes or the information is incomplete.

How to Establish Business Credit with Bad Personal Credit: Fix Your Business Credit

So, what’s all this monitoring for? It’s to contest any errors in your records. Mistakes in your credit report(s) can be corrected. But the CRAs normally want you to dispute in a particular way.

Disputes

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

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

How to Establish Business Credit with Bad Personal Credit: A Word about Building Business Credit

Always use credit smartly! Don’t borrow more than what you can pay off. Monitor balances and deadlines for payments. Paying off in a timely manner and in full will do more to increase business credit scores than just about anything else.

Establishing company credit pays off. Great business 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 company’s EIN links to high scores and credit issuers won’t feel the need to demand a personal guarantee.

How to Establish Business Credit with Bad Personal Credit: Takeaway

Business credit is an asset which can help your company for years to come. Learn more about how to establish business credit with bad personal credit by checking out our YouTube videos.

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