How Do I Build My Business Credit? Residential Real Estate Agents Ask This Question All the Time
Every entrepreneur asks this same question: how do I build my business credit?
Business credit is credit in a company’s name. It doesn’t link to a business owner’s consumer credit, not even when the owner is a sole proprietor and the sole employee of the company.
As such, a business owner’s business and consumer credit scores can be very different.
How Do I Build My Business Credit and Get The Advantages?
Due to the fact that business credit is separate from individual, it helps to safeguard a business owner’s personal assets, in the event of a lawsuit or business insolvency.
Also, with two distinct credit scores, a small business owner can get two separate cards from the same merchant. This effectively doubles purchasing power.
Another advantage is that even new ventures can do this. Going to a bank for a business loan can be a recipe for disappointment. But building small business credit, when done properly, is a plan for success.
Consumer credit scores rely on payments but also other components like credit utilization percentages.
But for company credit, the scores actually only hinge on if a business pays its invoices on time.
How Do I Build My Business Credit and Start The Process?
Growing company credit is a process, and it does not occur automatically. A small business has to proactively work to establish business credit.
However, it can be done readily and quickly, and it is much swifter than establishing consumer credit scores.
Merchants are a big part of this process.
Doing the steps out of order will lead 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 rejection 100% of the time.
How Do I Build My Business Credit and Get Started with Small Business Fundability?
A small business needs to be fundable to lenders and vendors.
Hence, a business will need a professional-looking website and e-mail address. And it needs to have site hosting bought from a supplier like GoDaddy.
And also, company phone and fax numbers ought to have a listing on 411.com.
At the same time, the company phone number should be toll-free (800 exchange or comparable).
A business will also need a bank account dedicated solely to it, and it has to have all of the licenses essential for running.
Licenses
These licenses all have to be in the particular, accurate name of the small 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 potentially also city licenses.
Learn more here and get started toward establishing small business credit.
How Do I Build My Business Credit and Start Credibly Dealing with the Internal Revenue Service?
Visit the IRS web site and acquire an EIN for the small business. They’re totally free. Choose a business entity such as corporation, LLC, etc.
A business can begin as a sole proprietor. But they will most likely want to switch to a variety of corporation or an LLC.
This is in order to limit risk. And it will take full advantage of tax benefits.
A business entity will matter when it involves taxes and liability in case of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and taxes. No one else is responsible.
Sole Proprietors Take Note
If you run a company as a sole proprietor, then at the very 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 small business name. Consequently, you can end up being directly accountable for all small business debts.
In addition, according to the Internal Revenue Service, by having this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 possibility for corporations! Prevent confusion and significantly reduce the odds of an IRS audit at the same time.
How Do I Build My Business Credit and Set off the Business Credit Reporting Process?
Start at the D&B web site and obtain 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 generate 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 sites for the business. You can do this at www.creditsuite.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.
This way, Experian and Equifax will have activity to report on.
Vendor Credit Tier
First you must establish 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 start to obtain credit in the retail and cash credit tiers.
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. This furniture could be particularly helpful to residential real estate agents.
But to start with, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are usually Net 30, rather than revolving.
Hence, if you get an 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 need to be paid in full within 30 days. 60 accounts must be paid in full within 60 days. In contrast to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.
To launch your business credit profile the right 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 like true starter credit can. These are vendors that will grant an approval with a minimum of 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 need to apply more than one time to these vendors. So, this is to demonstrate you are responsible and will pay timely. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/
How Do I Build My Business Credit and Get Benefits from Accounts That Don’t 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 worth.
You can always ask non-reporting accounts for trade references. And credit accounts of any sort will help you to better even out business expenditures, 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 onto the retail credit tier. These are companies like Office Depot and Staples, both of which have plenty of goods for sale which will help residential real estate agents.
Just 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.
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 more.
Fleet Credit Tier
Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are companies such as BP and Conoco. Use this credit to buy fuel, and to fix, and maintain vehicles. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the company’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 more and a 411 business phone listing.
Shell might say they want a specific amount of time in business or profits. But if you already have adequate vendor accounts, that won’t be necessary. And you can still get an approval.
Learn more here and get started toward establishing small business credit.
Cash Credit Tier
Have you been sensibly managing the credit you’ve gotten up to this point? Then move to the cash credit tier. These are companies like Visa and MasterCard. Only use your SSN 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 need 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).
Also, they want you to have an established business.
These are businesses such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are commonly MasterCard credit cards. If you have 14 trade accounts reporting, then these are in reach.
And there are tons of ways the business credit cards in the cash credit tier can help residential real estate agents.
Learn more here and get started toward establishing small business credit.
How Do I Build My Business Credit and Monitor My Business Credit?
Know what is happening with your credit. Make certain it is being reported and take care of any mistakes ASAP. Get in the practice of taking a look at credit reports and digging into the details, 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: www.creditsuite.com/monitoring.
At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. Equifax costs about $19.99.
Update Your Data
Update the relevant information if there are inaccuracies or the 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 Do I Build My Business Credit and Fix My 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 often want you to dispute in a particular way.
Disputes
Disputing credit report errors typically means you mail a paper letter with copies of any evidence of payment with it. These are documents like receipts and cancelled checks. Never send the originals. Always mail copies and retain the originals.
Fixing credit report inaccuracies also means you specifically itemize any charges you dispute. Make your dispute letter as crystal clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you sent in your dispute.
How Do I Build My Business Credit? A Word to the Wise
Always use credit smartly! Don’t borrow more than what you can pay back. Keep track of balances and deadlines for payments. Paying off on schedule and fully will do more to elevate business credit scores than nearly anything else.
Establishing small business credit pays off. Great business credit scores help a business get loans. Your lender knows the small business can pay its debts. They understand the company is bona fide.
The business’s EIN attaches to high scores and credit issuers won’t feel the need to demand a personal guarantee.
How Do I Build My Business Credit: Takeaways
Business credit is an asset which can help your small business for years to come. Learn more here and get started toward establishing small business credit.
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