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How to start building business credit

Published By Janet Gershen-Siegel at September 30th, 2017

Establishing corporate credit means that your company acquires chances you never believed you would. You can get new equipment, bid on real property, and cover the company payroll, even when times are a bit lean. This is especially helpful in seasonal businesses, where you can go for months with only minimal sales.

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

Credit History Length Matters

This is essentially how long your company has been using business credit. Of course newer businesses will have short credit histories. While there is not too much you can specifically do about that, do not worry. Credit reporting bureaus will also look at your personal credit score and your own history of payments. If your personal credit is good, and especially if you have a fairly long credit history (that is, you did not just get your first credit card recently), then your personal credit can come to the rescue of your corporate.

Naturally the opposite is also true– if your personal credit history is bad, then it will affect your corporate credit scores until your business and personal credit can be split.

Your Payment History is Important

Tardy payments will affect your business credit score for a good seven years. If you pay your business (and personal) debts off, as fast as possible and as completely as possible, then you can make a very real difference when it comes to your credit scores. Make sure to pay on time and you will reap the rewards of promptness.

Your Personal Credit can Affect Your Corporate Credit

Are you having a bad business year? Then it could end up on your personal credit score. And in case your business has not been around for too long, it will directly affect your corporate credit. However, you can unlink the two by taking steps to separate them. For instance, if you get credit cards only for your business, or you open up business checking accounts and other bank accounts (or even get a business loan), then the credit reporting bureaus will start to treat your personal and corporate credit separately. Also, be sure to incorporate, or at least file a DBA (doing business as) status. You can also pay for your company’s bills with your company credit card or checking account, and make certain it is the business’s name on the bill and not your own.

Do not Let Your Credit Utilization Rate Hurt Your Business

Credit utilization rate just means the amount of money 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 climbing, you’ll need to spend down and pay off your debts before borrowing more.

The Credit Reporting Bureaus Can Get it Wrong

Just the same as each entity out there, credit reporting bureaus like Equifax and Experianare only as good as their data. If your company’s name is similar to another’s, or your 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 crystal clear communications. Do not just let them stay wrong! You can fix this! And while you’re at, it you should also be monitoring the credit reporting bureau which only handles personal and not corporate credit, TransUnion. If you do not know how to pull a credit report, do not fret. It is simple– just use the above links.

Once you know what affects your business credit score, you are that much closer to building improved corporate credit.

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