How to Build Company Credit and Ascend the Credit Ladder

Do you know how to build company credit? We break down exactly what it takes to get your business the credit you need to grow.

Establishing company credit means that your company obtains chances you never thought you would. You can get all-new equipment, bid on real property, and deal with the company payroll. And you can do so even when times are a bit lean.

This is specifically helpful in seasonal businesses, where you can go for several months with merely low sales.

As a result of this, you should really focus on building your company credit. Improve and maintain your scores and you will have these chances. Do not, and either you do not get these chances, or they will cost you a lot more. And no company owner wants that.

You must recognize what affects your small business credit before you can make it better.

How to Build Company Credit: Credit History Length Matters

This is basically the length of time your business has been utilizing company credit. Naturally newer small businesses will have very short credit histories. Although there is not so much you can particularly do about that, do not worry.

Credit reporting agencies will also take a look at your personal credit score and your very own record of payments.

If your consumer credit is excellent, and especially if you have a reasonably lengthy credit history, then your individual credit can come to the rescue of your company. That is, you did not just get your very first credit card a short while ago.

Naturally the converse is also right. So if your private credit history is poor, then it will impact your company credit scores until your small business and individual credit can be separated.

How to Build Company Credit: Your Payment History is Important

Tardy payments will affect your business credit score for a good seven years. So pay your company (and personal) financial obligations off, as speedily as possible and as fully as possible. And then you can make a very real difference when it pertains to your credit scores.

Make sure to pay on schedule and you will reap the benefits of promptness.

How to Build Company Credit: Your Personal Credit can have an effect on Your Company Credit

Are you having a substandard business year? Then it could wind up on your personal credit score. And in case your small business has not been around for too long, it will directly impact your company credit.

But you can separate both by taking measures to do just that. For example, you can get credit cards solely for your company, or you open business checking accounts and various other bank accounts (or perhaps get a business loan).

Then the credit reporting agencies will start to treat your private and company credit on an individual basis.

Also, make certain to incorporate, or at least file a DBA (doing business as) status. You can also pay for your company’s charges with your business credit card or checking account. And make sure it is the business’s full name on the bill and not yours.

How to Build Company Credit: Do not Let Your Credit Utilization Rate Harm Your Small business

Your credit utilization rate just shows the amount of money you have on credit which is then divided by your total available credit. Lenders commonly do not want to see this go above 30%. So for every $100 in credit, do not borrow on over $30 of that.

If this percent is increasing, you’ll need to spend down. And pay your financial obligations ahead of borrowing more.

How to Build Company Credit: The Credit Reporting Bureaus Can Get it Wrong

Just like each and every company around, credit reporting bureaus like Equifax and Experian are only as good as their files. If your company’s name is like another’s, or your name is a lot like another business owner’s, there can possibly be some oversights.

So check those reports, and your small business report at Dun & Bradstreet, PAYDEX. Stay on top of these reports and challenge charges with documentation and clear-cut communications. Do not just allow them to stay wrong! You can repair this!

And while you’re at, it you should also be overseeing the credit reporting bureau which only handles individual and not company credit. And that is TransUnion. If you do not know the way to pull a credit report, do not worry. It’s easy.

How to Build Company Credit: The Method

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

Thus, a business owner’s business and individual credit scores can be very different.

The Advantages

Due to the fact that company credit is separate from consumer, it helps to secure a business owner’s personal assets, in case of a lawsuit or business insolvency.

Also, with two separate credit scores, an entrepreneur can get two different cards from the same vendor. This effectively doubles purchasing power.

Another advantage is that even startup ventures can do this. Visiting a bank for a business loan can be a formula for frustration. But building business credit, when done right, is a plan for success.

Individual credit scores rely on payments but also other considerations like credit use percentages.

But for company credit, the scores truly just depend on if a business pays its debts on a timely basis.

The Process

Growing small business credit is a process, and it does not happen without effort. A small business will need to proactively work to establish small business credit.

However, it can be done easily and quickly, and it is much faster than establishing personal credit scores.

Merchants are a big part of this process.

Doing the steps out of sequence will cause repetitive rejections. Nobody can start at the top with company credit. For example, you can’t start with store or cash credit from your bank. If you do you’ll get a denial 100% of the time.

Business Legitimacy

A small business has to be credible to credit issuers and vendors.

Hence a small business will need a professional-looking web site and email address. And it needs to have site hosting bought from a vendor such as GoDaddy.

And company phone and fax numbers ought to have a listing on ListYourself.net.

Also the company telephone number should be toll-free (800 exchange or the equivalent).

A company will also need a bank account devoted solely to it, and it must have every one of the licenses necessary for operation.

Licenses

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

So note that this means not just state licenses, but possibly also city licenses.

Working with the Internal Revenue Service

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

A small business can start off as a sole proprietor. But they will more than likely wish to change to a form of corporation or partnership.

This is in order to limit risk. And it will maximize tax benefits.

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

Sole Proprietors Take Note

If you operate a company as a sole proprietor, then at 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. Because of this, you can wind up being directly accountable for all business financial obligations.

In addition, according to the IRS, using this arrangement there is a 1 in 7 possibility of an IRS audit. There is a 1 in 50 chance for corporations! Avoid confusion and considerably reduce the chances of an Internal Revenue Service audit as well.

Kicking 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 web sites for the company. You can do this at fastcs.wpengine.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.

By doing so, Experian and Equifax will have something to report on.

Vendor Credit Tier

First you should establish trade lines that report. This is also known as 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 obtaining retail store and cash credit.

These sorts of accounts have the tendency 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 trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are commonly Net 30, rather than revolving.

So if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts need to be paid fully within 60 days. Unlike 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 right way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then make use of the credit.

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

Vendor Credit Tier – It Makes Sense

Not every vendor can help like true starter credit can. These are merchants that will grant an approval with marginal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may need to apply more than one time to these vendors, and you may have to buy some things you do not need. So this is to prove you are responsible and will pay promptly.

Consider giving nonessential things to charitable organizations.

Uline Shipping Supplies

Uline Shipping Supplies is a true starter vendor. You can find them online at www.uline.com. They sell shipping, packing, and industrial supplies, and they report to D&B.

You need to have a D-U-N-S number. They will request 2 references and a bank reference. The first few orders might need to be prepaid to initially get approval for Net 30 terms. Also, you may have to buy some items you do not need.

Quill

Quill is an additional true starter vendor. You can find them online at www.quill.com. They sell office, packaging, and cleaning supplies, and they report to D&B and Experian.

Since Quill reports to two separate credit reporting agencies, you get two credit experiences with them. Place an initial order first unless the D&B score is established.

Usually they’ll put you on a 90 day prepayment schedule. If you order items each month for 3 months, they will generally approve you for a Net 30 Account.

Grainger Industrial Supply

Grainger Industrial Supply is likewise a true starter vendor. You can find them online at www.grainger.com. They sell safety equipment, plumbing supplies, and more, and they report to D&B. You will need a business license, EIN, and a D-U-N-S number.

For under a $1000 credit limit they will approve almost any person with a business license.

Accounts That Do Not Report

Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to a minimum of one of the CRAs, a trade account which does not report can still be of some value.

You can always ask non-reporting accounts for trade references. And credit accounts of any sort will help you to better even out business expenses, thereby making budgeting simpler. These are companies like PayPal Credit, T-Mobile, and Best Buy.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are businesses such as Office Depot and Staples. These companies are more likely to have goods you need.

Use the company’s EIN on these credit applications.

One good example is Lowe’s. They report to D&B, Equifax and Business Experian. They want to see a D-U-N-S and a PAYDEX score of 78 or better.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then progress to the fleet credit tier. These are businesses like BP and Conoco. Use this credit to buy, fix, and take care of vehicles. Make certain to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or better and a 411 business phone listing.

Shell may say they want a specific amount of time in business or revenue. But if you already have enough vendor accounts, that won’t be necessary. And you can still get an approval.

Cash Credit Tier

Have you been sensibly handling the credit you’ve gotten up to this point? Then move to the cash credit tier. These are businesses such as Visa and MasterCard. Keep your SSN off these applications; use your EIN instead.

One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.

Plus they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Plus they want you to have an established business.

These are companies like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are often MasterCard credit cards. If you have 14 trade accounts reporting, then these are in reach.

Monitor Your Business Credit

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

We can help you monitor business credit at Experian and D&B for only $24/month. See: fastcs.wpengine.com/business-credit-monitoring.

At D&B you can monitor at: www.dandb.com/credit-builder. At Experian, you can monitor your account at: www.smartbusinessreports.com/Landing/1217/. And at Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. Experian and Equifax cost about $19.99; D&B ranges from $49.99 to $99.99.

Update Your Data

Update the data if there are inaccuracies or the info 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. And for Equifax, go here: www.equifax.com/business/small-business.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any mistakes in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs often want you to dispute in a particular way.

Get your company’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.

Disputes

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

Fixing credit report errors also means you specifically itemize any charges you dispute. Make your dispute letter as understandable as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Dispute your or your small 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 directions 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 How to Build Company Credit

Always use credit sensibly! Don’t borrow more than what you can pay back. Keep track of balances and deadlines for payments. Paying off in a timely manner and fully will do more to elevate business credit scores than almost anything else.

Establishing business credit pays. Good business credit scores help a small business get loans. Your loan provider knows the company can pay its financial obligations. They recognize the small business is bona fide.

The small business’s EIN links to high scores and lending institutions won’t feel the need to demand a personal guarantee.

Business credit is an asset which can help your company for many years to come. Learn more here and get started toward building company credit.

How to Build Company Credit: Takeaways

Once you understand what affects your business credit score, you are that much nearer to knowing how to build company credit. Discover this new way to build company credit.