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How to Improve Business Credit

Published By Janet Gershen-Siegel at May 11th, 2018

Do you know how to improve business credit? We break down the most important things you need to know to ensure better corporate credit.

Learn How to Improve Business Credit

improve business credit Credit Suite2 - How to Improve Business CreditImproving your business credit scores means that your business obtains opportunities you never felt that you would. You can get new equipment, bid on realty, and cover the company payroll, even when times are a bit lean. This is particularly helpful in seasonal businesses, where you can go for several months with simply nominal sales.

Due to this, you should really focus on developing your company 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 business owner wants that. You ought to know what affects your company credit before you can make it better.

Every Business Needs Business Credit Building

Company credit is credit in a business’s name. It doesn’t tie to an owner’s consumer credit, not even if the owner is a sole proprietor and the solitary employee of the company. 

As a result, an entrepreneur’s business and personal credit scores can be very different. But you will need to know how to improve business credit.

The Advantages

Because business credit is separate from personal, it helps to protect an entrepreneur’s personal assets, in case of legal action or business bankruptcy.

Also, with two distinct credit scores, a business owner can get two separate cards from the same vendor. This effectively doubles purchasing power.

Another benefit is that even new ventures can do this. Visiting a bank for a business loan can be a recipe for frustration. But building company credit, when done properly, is a plan for success.

Personal credit scores depend upon payments but also various other elements like credit use percentages. 

But for small business credit, the scores truly just depend on if a company pays its invoices promptly. So, paying on time or early is a reliable way how to improve business credit.

How to Improve Business Credit: The Process

If you want to know how to improve business credit, understand that it is a process. It does not occur without effort. A small business needs to actively work to build company credit. 

That being said, it can be done easily and quickly, and it is much swifter than building personal credit scores. 

Merchants are a big aspect of this process.

Undertaking the steps out of sequence leads to repetitive rejections. Nobody can start at the top with company 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.

Company Fundability

A company has to be fundable to lenders and vendors. 

Consequently, a small business needs a professional-looking web site and e-mail address. And it needs to have site hosting bought from a merchant such as GoDaddy. 

Additionally, business phone and fax numbers must have a listing on 411. You can do that here: http://www.listyourself.net

In addition, the business phone number should be toll-free (800 exchange or the like).

A small business also needs a bank account devoted strictly to it, and it needs to have all of the licenses necessary for running. 

Licenses

These licenses all must be in the exact, accurate name of the business. And they must have the same small business address and phone numbers. 

So, keep in mind, that this means not just state licenses, but possibly also city licenses. Professionally setting up your business is an important way how to improve business credit.

improve business credit Credit Suite3 - How to Improve Business Credit

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

Working with the IRS

Visit the IRS web site and get an EIN for the business. They’re free of charge. Pick a business entity such as corporation, LLC, etc. 

A business may get started as a sole proprietor. But they absolutely need to switch to a variety of corporation or an LLC. 

This is to lessen risk. And it will optimize tax benefits.

A business entity matters when it involves tax obligations and liability in the event of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and taxes. No one else is responsible.

The best thing to do is to incorporate. You should only look at a DBA as an interim step on the way to incorporation. Incorporating is vital when you’re looking at how to improve business credit.

Setting off the Business Credit Reporting Process

Start at the D&B web site and get a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a company in their system, to produce 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 company. 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 have something to report on.

Vendor Credit

First you must 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 start to get retail and cash credit.

These kinds of accounts often tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first off, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are generally Net 30, rather than revolving. 

So, 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.

Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/ 

Retail Credit

Once there are 3 or more vendor trade accounts reporting to at least one of the CRAs, then move onto retail credit. These are companies which include Office Depot and Staples. 

Only use your Social Security Number 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 progress to fleet credit. These are companies like BP and Conoco. Use this credit to purchase fuel, and to repair and maintain vehicles. Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN.

improve business credit Credit Suite3 - How to Improve Business Credit

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

Cash Credit

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

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

Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and address any errors ASAP. Get in the practice of checking credit reports. Dig into the specifics, not just the scores.

We can help you monitor business credit at Experian and D&B for a lot less than it would cost you at the CRAs.

At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business

Update Your Record

Update the info if there are mistakes or the relevant information is incomplete. At D&B, you can do this at: https://iupdate.dnb.com/iUpdate/viewiUpdateHome.htm. For Experian, go here: www.experian.com/small-business/business-credit-information.jsp. So, for Equifax, go here: www.equifax.com/business/small-business.

How to Improve Business Credit by Fixing Errors

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

Get your business’s PAYDEX report at: www.dnb.com/about-us/our-data.html. Get your company’s Experian report at: www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get your Equifax business credit report at: www.equifax.com/business/credit-information.

How to Improve Business Credit with Disputes

Disputing credit report mistakes commonly means you send a paper letter with copies of any evidence of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always send copies and retain the original copies.

Fixing credit report errors also means you specifically spell out any charges you contest. Make your dispute letter as understandable as possible. Be specific about the problems with your report. Use certified mail to have proof that you mailed in your dispute.

Dispute your or your business’s Equifax report by following the instructions here: www.equifax.com/small-business-faqs/#Dispute-FAQs

You can dispute mistakes on your or your company’s Experian report by following the instructions here: www.experian.com/small-business/business-credit-information.jsp

And D&B’s PAYDEX Customer Service telephone number is here: www.dandb.com/glossary/paydex.

A Word about Business Credit Building

Always use credit responsibly! Never borrow beyond what you can pay off. Monitor balances and deadlines for repayments. Paying on time and in full does more to boost business credit scores than almost anything else.

Growing business credit pays. Excellent business credit scores help a business get loans. Your credit issuer knows the small business can pay its financial obligations. They understand the business is for real. 

The small business’s EIN links to high scores and loan providers won’t feel the need to require a personal guarantee.

Takeaways on How to Improve Business Credit

Business credit is an asset which can help your small business for years to come. Learn more here and get started toward growing company credit. Working on it regularly is one great way how to improve business credit.

improve business credit Credit Suite3 - How to Improve Business Credit

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

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