HERE'S HOW TO BUILD YOUR BUSINESS CREDIT SCORE

14 June 4 MINS READ
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Without a doubt, every small business owner should work to improve and preserve their personal credit score. However, a solid business credit score is as essential if you want to get your business off the ground and keep it there. If the business finance arrangements you've been provided don't appeal to you, the first thing you should do is focus on your company's credit health.

We discuss ten things you can do right now to build a good company credit profile in this article.

10 STEPS TO BUILD YOUR BUSINESS CREDIT SCORE

1. Register Your Business and Obtain an EIN

You must first register your business with your Secretary of State in order to generate a business credit file. You will choose the name of your firm and the structure of your organization during this step (LLC, corporation, etc.).

You'll need to request an Employer Identification Number (EIN) from the IRS after you've registered your firm. Business credit bureaus use an EIN for business credit reports, just as personal credit bureaus use your Social Security number for personal credit reports. So, the EIN is essentially a business's Social Security number. To apply for business loans, incorporate your business, create a business bank account, work with vendors or suppliers, or file business taxes, you'll need an EIN.

In about 10 minutes, you could apply for an EIN online. You can use your EIN for most business activities as soon as you acquire it. However, using your EIN to submit taxes electronically will take roughly two weeks.

2. Make Sure Yor Profile Is Accurate

It's not unusual for business owners to discover mistakes in their profiles. Fortunately, the business credit reporting bureaus (Dunn & Bradstreet, Equifax, and Experian are the three largest) are incentivized to ensure that their data is correct. Accurate or out-of-date information isn't particularly helpful to them because they sell access to their data to lenders—all three have mechanisms in place to handle valid disputes and correct verified errors. Furthermore, even tiny mistakes in your profile can make it more difficult for your company to get a loan. Be thorough.

3. Separate Your Business And Personal Finances

Business owners should ideally incorporate their business. But, even sole proprietors need to obtain an employer identification number (EIN), register their business with state and/or municipal agencies, and secure the necessary business permits.

Before you change your company's legal structure, consult a tax professional. Instead of a personal bank account and credit card, open a business account. Avoid using your personal resources to subsidize your firm once you've acquired a business line of credit. Keep your personal and company credit separate so you don't have to risk your personal credit every time you apply for a business loan.

4. Apply For A Business Credit Card (s)

Obtain at least one company credit card that is not personally tied to you or any other owners. Choose a credit card for your business from a company that reports to the credit bureaus.

5. Establish Credit Accounts With Suppliers

Establish a credit account with select suppliers if you work with them frequently and have a strong payment connection with them to boost the number of positive payments on your file. This may aid in the improvement of your business credit score.

6. Borrow From Vendors That Report To Credit Bureaus

Opening accounts with creditors who will submit your company's payment history to the business credit bureaus is the next step in building business credit. However, there is a catch. When your business has no previous credit history, it may be difficult to qualify for business funding. In this case, vendor accounts may be a viable option. Even if you have no credit history, some merchants may be ready to provide you net-30, net-60, or even net-90 day terms.

Remember that simply opening a vendor account isn't enough. You'll want to work with suppliers who submit their payment history to one or more of the business credit reporting bureaus.

7. Make Your Payments On Time

Paying your bills on time is the best approach to building your company credit score. You may not appear creditworthy to lenders and suppliers if you have a poor track record of making regular payments. Worse yet, firms to whom you owe money, such as suppliers and utility companies, might report you for late payments. It can be difficult to repair a low credit score, so make every effort to meet your payment obligations.

Enabling reminders on your phone or computer, setting up automated payments, and assigning specific days of the week or month to make payments are all things you can do to ensure timely payments. Making timely payments can also help you keep your suppliers happy, and boost your credit score if they report your credit history.

8. Keep Your Credit Utilization Well Within Your Account's Credit Limit

One of the most significant issues affecting your business credit rating is owing banks and other lenders large sums of money. While you may require a loan or two to help you grow your business and meet specific expenses, it is usually best to keep your revolving debt to a minimum. Maintaining a modest debt load lowers your credit utilization, which helps to keep your credit score high.

9. Keep Tabs On Your Credit Report To Ensure It's Error-free

Dun & Bradstreet, Experian, and Equifax are among the credit bureaus that collect data and provide business credit scores. Different lenders report distinct sorts of data, and each business credit agency has a different formula for determining scores. It's a good idea to keep track of all three credit bureaus because you never know which ones your vendors, creditors, or potential clients will check.

10. Keep A Solid Public Record

Credit bureaus do more than just ensure that you pay your bills on time. They'll also keep an eye on your business's public record and keep track of any legal filings filed in its name. Bankruptcies, tax liens, and other public documents that identify late or partial payments are all examples that indicate risk.

One more reason to stay on track? It's tough to forget such a blemish on your record.

BOTTOM LINE

If you plan to use a credit card to fund your business, you'll want to keep an eye on your credit score. It will not only help you obtain loans, but it will also allow you to avoid prepayment. Yes, you are more than a number, however, your credit score is an excellent indicator of your business's health. Build your business credit score to ensure that it continues to reflect the story you want to convey for years to come.

Get business credit cards up to $150,000 with no business history or revenue required.