Published By Janet Gershen-Siegel at August 30, 2017
Get business credit cards that don’t impact your personal credit – this is FOOLPROOF!
When you consider the difference of your business credit score vs personal credit score, keep in mind that any inquiries into your personal credit score will negatively affect that score. And a lot of merchants and lenders will perform inquiries when doing business with you for the first time. You do not want their inquiries to be affecting your personal credit.
You can’t get into Dun & Bradstreet’s system without one, and they are free, anyway. A D-U-N-S number differentiates your business from all others, including similarly-named businesses.
Dun & Bradstreet has a requirement that you register your small business on their site before they will hand out a D-U-N-S number.
Please note: there are a few slightly different methods of getting a D-U-N-S if your business belongs to a special class. These include if your small business is a US government contractor or grantee, or your company is Canadian, or you are working as an Apple developer.
Once in D&B’s system, search Equifax and Experian’s sites for your 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 so, Experian and Equifax will have something to report on.
If you operate your business as a sole proprietor at least file for DBA status. If you do not, then your personal name will be the same as your company name.
As a result, you can still end up being personally liable for all business debts. Plus, according to the Internal Revenue Service, with this structure there’s a 1 in 7 chance of an IRS audit. This is in contrast to a 1 in 50 chance for incorporated businesses! Avoid confusion with this step. And you can significantly lower your chances of an IRS audit. And who doesn’t want that?
Have a meeting with your tax advisor or financial planner to determine which legal entity will best fit your small business and particular financial situation.
Incorporation can also help to protect your personal assets in the event of a lawsuit. Once your corporation or LLC is registered on your state’s Secretary of State’s website, you can then get a Business Federal Tax ID Number. So this way, you can open your business’s bank account
The IRS makes it easy to do this. You can apply online as soon as you determine your eligibility.
If so, then you’re good to go.
Have a conversation with your local bank about getting business checking and other accounts.
If you have been a loyal customer on the personal side, and you can show your small business pays its bills on time, then your bank will be a lot happier working with your business.
These are really any bills which are the direct responsibility of your company. They include everything from Wi-Fi in your business’s name to rent or a mortgage for your office space.
Your business could pay a cell phone provider or even the oil or gas bill, if that is appropriate.
Ask your utilities if they will report to the credit reporting agencies. If they will, then your company will see credit scores rise as you pay bills on time.
The best way to keep your business credit cards from impacting your personal credit is to build business credit.
Small business credit is credit in a business’s name. It doesn’t tie to a business owner’s consumer credit, not even if the owner is a sole proprietor and the sole employee of the small business. Consequently, a business owner’s business and consumer credit scores can be very different.
Business credit is an asset which can help your company for many years to come.
Because business credit is distinct from individual, it helps to secure a business owner’s personal assets, in the event of legal action or business bankruptcy. Also, with two distinct credit scores, a small business owner can get two separate cards from the same merchant. This effectively doubles buying power.
Another benefit is that even startup ventures can do this. Heading to a bank for a business loan can be a recipe for frustration. But building small business credit, when done correctly, is a plan for success.
Personal credit scores are dependent on payments but also additional considerations like credit utilization percentages. But for small business credit, the scores actually merely hinge on if a business pays its invoices in a timely manner.
Establishing company credit is a process, and it does not happen automatically. A corporation has to actively work to establish corporate credit. Having said that, it can be done easily and quickly, and it is much more efficient than developing consumer credit scores.
Vendors are a big part of this process.
Accomplishing the steps out of order will lead to repetitive rejections. No one can start at the top with business credit. For instance, you can’t start with store or cash credit from your bank. If you do you’ll get a rejection 100% of the time.
A corporation has to be trustworthy to credit issuers and vendors. Due to this fact, a company will need a professional-looking website and email address, with website hosting from a merchant like GoDaddy.
Also business telephone and fax numbers need to have a listing on 411.com.
Also the business phone number should be toll-free (800 exchange or comparable).
A corporation will also need a bank account devoted purely to it, and it needs to have every one of the licenses necessary for running. These licenses all have to be in the precise, appropriate name of the small business, with the same small business address and phone numbers.
So keep in mind that this means not just state licenses, but possibly also city licenses.
Visit the IRS web site and obtain an EIN for the company. They’re totally free. Choose a business entity such as corporation, LLC, etc.
A small business can start off as a sole proprietor. But they will probably wish to change to a variety of corporation or partnership to reduce risk and make best use of tax benefits.
A business entity will matter when it comes to tax obligations and liability in the event of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. Nobody else is responsible.
Start with vendor credit.
First you need to build trade lines that report. This is also called the vendor credit tier. 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 getting retail store and cash credit.
These sorts 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 of all, what is vendor or trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are typically Net 30, versus revolving.
So if you get an approval for $1,000 in vendor credit and use all of it, you must 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 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 kick off your business credit profile the right way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. Once 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.
Not every vendor can help in the same way true starter credit can. These are merchants 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.
But you may have to apply more than one time to these vendors, and you may have to purchase some things you don’t need to have, to prove you are responsible and will pay timely. Consider donating unwanted items to charitable organizations.
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then progress to the retail credit tier. These are service providers like Office Depot and Staples. These companies are likelier to have goods you need.
Use the small business’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 better.
Are there 8 to 10 accounts reporting? Then progress to the fleet credit tier. These are companies such as BP and Conoco. Use this credit to purchase, fix, and maintain vehicles. Make certain to apply using the corporation’s EIN.
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.
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 attainable.
Know what is happening with your credit. Make sure it is being reported and deal with any inaccuracies ASAP. 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 90% less than it would cost you at the CRAs. See: https://www.creditsuite.com/business-credit-monitoring. Update the details if there are errors or the relevant information is incomplete.
So, what’s all this monitoring for? It’s to dispute any mistakes in your records. Mistakes in your credit report(s) can be corrected. But the CRAs normally want you to dispute in a particular way.
Disputing credit report errors commonly means you mail a paper letter with copies of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always send copies and keep the original copies.
Fixing credit report mistakes also means you precisely detail any charges you challenge. Make your dispute letter as understandable 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.
Always use credit smartly! Don’t borrow beyond what you can pay off. Monitor balances and deadlines for payments. Paying in a timely manner and in full will do more to increase business credit scores than pretty much anything else.
Building small business credit pays. Great business credit scores help a business get loans. Your lender knows the business can pay its financial obligations. They understand the corporation is authentic.
The company’s EIN links to high scores and lenders won’t feel the need to call for a personal guarantee.
Enhance the professionalism of your small business and keep your personal and business credit separate.
Learn more here and get started toward getting the best business credit cards that don’t impact your personal credit.