Published By Janet Gershen-Siegel at June 8, 2018
Written by Janet Gershen-Siegel
Do you know how to build business credit? We break down just what you need to know and show you what will work.
To build business credit means that your small business gets opportunities you never considered you would. You can get brand new equipment, bid on realty, and deal with the company payroll, even when times are a bit lean.
This is especially helpful in seasonal companies, where you can go for several months with solely minimal sales.
As a result of this, you really should focus on building business credit. Improve and maintain your scores and you will have these opportunities. Do not, and either you do not get these opportunities, or they will set you back you a lot more.
And no entrepreneur wants that. You must understand what affects your business credit before you can make it better.
This is in a nutshell how long your company has been making use of company credit. Of course newer businesses will have brief credit histories. Although there is not so much you can specifically do about that, do not fret.
Credit reporting agencies will also consider your personal credit score and your personal background of payments.
If your personal credit is excellent, and in particular if you have a reasonably long credit history, then your individual credit can come to the rescue of your business.
Of course the opposite is also right. If your individual credit history is poor, then it will impact your corporate credit scores. That is, until your company and individual credit can be separated.
Your credit utilization rate just signifies the amount of money you have on credit. It is then divided by your total available credit. Lenders generally speaking 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 percentage is increasing, you’ll have to spend down and repay your financial debts before borrowing more.
Late repayments will influence your small business credit score for a good seven years.
If you pay your business (and personal) financial obligations off, as fast and fully as possible, then you can make a very real difference when it concerns your credit scores.
Make sure to pay punctually and you benefit.
A bad business year could end up on your consumer credit score. And if your company has not around for too long, it will directly affect your ability to build business credit. Nonetheless, you can unlink both by taking steps to separate them.
Say, if you get credit cards only for your business, or you open business bank accounts, then the credit reporting agencies will begin to treat your individual and company credit on an individual basis.
Also, make sure to incorporate, or at least file a DBA (doing business as) status. You can also pay company debts with your business credit card or checking account. Also, ensure it is the business’s name on the bill and not your own.
Like every organization, credit reporting bureaus such as Equifax and Experian are only as good as their data. If your business’s name is like another’s, or your name is a lot like another business owner’s, there can potentially be some mistakes.
So keep track of those reports, and your business report at Dun & Bradstreet, PAYDEX.
Stay on top of these reports. Dispute charges with records and transparent communications. Do not just allow them to stay wrong! You can correct this!
And while you’re at, keep track of the credit reporting bureau which only handles consumer credit, TransUnion. If you do not know how you can pull a credit report, do not worry. It’s easy.
Once you learn what affects your company credit score, you are that much closer to creating improved corporate credit. Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.