Establish Credit When You Have None

How do you establish credit when you have none? 

Every Business Needs Small Business Credit Establishing

Small business credit is credit in a small business’s name. It doesn’t connect to an entrepreneur’s consumer credit, not even when the owner is a sole proprietor and the sole employee of the company. 

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

The Advantages

Given that company credit is separate from consumer, it helps to protect an entrepreneur’s personal assets, in the event of court action or business bankruptcy.

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

Another advantage is that even startups can do this. Going to a bank for a business loan can be a recipe for disappointment. But building small business credit, when done right, 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 just hinge on if a business pays its invoices timely.

Establish Credit When You Have None: The Process

Establishing business credit is a process. It does not happen automatically. A business has to actively work to build company credit. 

Having said that, it can be done readily and quickly, and it is much speedier than establishing personal credit scores. 

Merchants are a big aspect of this process.

Carrying out the steps out of order results in repetitive rejections. Nobody can start at the top with business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Establish Credit When You Have None with Small Business Fundability

A business needs to be fundable to lenders and merchants. 

Due to this fact, a company needs a professional-looking web site and e-mail address. And it needs to have site hosting bought from a supplier such as GoDaddy. 

And also, company telephone and fax numbers must have a listing on 411. You can do that here: http://www.listyourself.net. 

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

A small business also needs a bank account dedicated solely to it, and it must have all of the licenses necessary for operation. 

Licenses

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

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

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

Working with the Internal Revenue Service

Visit the Internal Revenue Service website and get an EIN for the company. They’re free of charge. Select a business entity like corporation, LLC, etc. 

A business may start off as a sole proprietor. But they absolutely need to change to a kind of corporation or an LLC. 

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

A business entity matters when it comes to tax obligations and liability in the event of litigation. A sole proprietorship means the business owner is it when it comes to liability and taxes. Nobody 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.

Establish Credit When You Have None: Getting Started

Start at the D&B website and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a small business into 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 correctness 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.

Establish Credit When You Have None with the Vendor Credit Tier

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 to get credit in the retail and cash credit tiers.

These sorts of accounts tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor workwear, 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 ordinarily Net 30, versus revolving. 

Therefore, 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, like within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts must be paid fully within 60 days. In contrast to with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of. 

To start your business credit profile the proper way, you should get approval for vendor accounts that report to the business credit reporting bureaus. Once 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 Helps

Not every vendor can help in the same way true starter credit can. These are vendors that grant an approval with negligible effort. You also need 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 have to apply more than one time to these vendors. So, this is to confirm you are reliable and pay timely. Here are some stellar choices from us: https://oldcs.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/ 

Uline

Uline 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 have to have a D-U-N-S number. They request 2 references and a bank reference. The first few orders may have to be prepaid to first get approval for Net 30 terms.

Quill

Quill is another 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 bureaus, you get two credit experiences with them. Place an initial order first unless the D&B score is developed.

Typically, they put you on a 90-day prepayment schedule. If you order items every month for 3 months, they commonly 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 need a business license, EIN, and a D-U-N-S number. 

For under a $1000 credit limit they approve almost anybody with a business license.

Accounts That Don’t Report

Non-reporting trade accounts can also be helpful. While you do want trade accounts to report to at least one of the CRAs, a trade account which does not report can also be of some value. 

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

Establish Credit When You Have None with the Retail Credit Tier

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

Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

One instance 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 higher.

Establish Credit When You Have None with the Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are companies such as BP and Conoco. Use this credit to purchase fuel, and to fix, and take care of vehicles. Only 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.

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

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

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

Establish Credit When You Have None with the Cash Credit Tier

Have you been responsibly managing the credit you’ve gotten up to this point? Then move onto the cash credit tier. 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.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or higher. 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 company.

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

Establish Credit When You Have None and Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and address any errors ASAP. Get in the practice of taking a look at 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 90% less than it would cost you at the CRAs. See: fastcs.wpengine.com/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 Information

Update the relevant information if there are inaccuracies or the details 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.

Establish Credit When You Have None and Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any inaccuracies in your records. Mistakes in your credit report(s) can be fixed. 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.

Disputes

Disputing credit report inaccuracies usually means you mail 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 send copies and keep the original copies.

Fixing credit report errors also means you specifically itemize any charges you contest. Make your dispute letter as clear as possible. Be specific about the concerns with your report. Use certified mail to have proof that you sent in your dispute.

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

You can dispute errors on your or your business’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 sensibly! Don’t borrow more than what you can pay off. Monitor balances and deadlines for payments. Paying off punctually and in full does more to boost business credit scores than nearly anything else.

Building company credit pays off. Good business credit scores help a company get loans. Your lending institution knows the business can pay its debts. They recognize the company is for real. 

The company’s EIN connects to high scores and lenders won’t feel the need to call for a personal guarantee.

Establish Credit When You Have None: Takeaways

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

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