10 Tips for the Best Business Credit

The world of credit reporting and lending is a harsh catch-22 for businesses and consumers. Most business owners don’t know anything about business credit or that it even exists.

We’ve found that many business owners:

  • Assume that all their vendors and creditors automatically report.
  • Think if they’re paying their bills their company credit will be good.
  • Don’t know that their profiles are an ‘open-book’ and can be reviewed by anyone without their knowledge.
  • Want money, but don’t know how their business & personal credit impacts their ability to qualify or what they need financially to qualify.
  • Don’t realize the importance of presenting excellent credit scores for gaining new business accounts, partnerships, and the best financial tools.
  • Do not prepare in advance for gaining lines, loans, leases, credit, or the best payment terms by showing a low risk well-rounded business and personal credit picture.

You can build business credit and still not know how to manage your credit – the two are not mutually exclusive. Business credit building and management can be just as easy as with personal credit, once you have a handle on what to look out for and how they differ.

Here are some tips for maintaining the best credit:

    1. Be diligent with your payments.

Always pay on time, but to get the best business credit scores try to pay early. Paying before terms may be an unreasonable request for some companies with a limited cash flow. It’s something we recommend because the bureaus and lenders will look favorably on a company that can pay early, which will result in much higher business credit scores and indexes.

If you have a bookkeeper managing bills, make sure there are no human errors going on that might cause you to be late or go delinquent on accounts. We recommend checking the books on a regular basis to make sure all your payments are being made.

  • Don’t mess with taxes – the government will catch-on.

    Tax liens can cause significant damage to business credit profiles and the overall credibility of a company. When the IRS issues their demand for payment letter, they give businesses a very short timeframe to pay the bill. It can be difficult for businesses to pay this bill on time or sometimes they may not receive the letter at all. A lien is generated after the payment has gone past due. Even after a lien is paid, it’s possible for both the filing date and release date to be listed on reports for years to come.

  • Make sure your business exists.

    The strength in your credit does not always come from the vendors you purchase from and the algorithm that generates indexes and scores. Many lenders, creditors, and vendors will look at the building blocks of your company to weigh how successful you are and will be. What kind of effort are you making to build exposure and generate business?

    Do you have a website?

    Do you have a toll-free number?

    Do you have social media pages?

    How are your reviews?

    Can prospects easily find your business physically and digitally?

    Is your business phone, address, and website listed in public business listings?

    Do you have business bank accounts?

    Do you have a business credit file?

  • Build, foster, and maintain relationships.

    Building relationships and networking with other business owners is a crucial part of running your business. It helps to build credibility and strengthen relations between you and your customers and vendors. For new customers, suppliers, investors, and partners to be comfortable working with your company you need to be able to strengthen communication and confidence. This goes a long way in building up integrity.

  • Do your due diligence.

    Research current and potential lenders, vendors, creditors, and partners before working with them.

    Vendors: Call them and find out who they report to before agreeing to work with them. This might take some digging, but if you ask the right person you can find the answer.

    Lenders/creditors: Find out if they will be reporting loans/lines to business credit. Get them to tell you what bureau before agreeing to any terms.

    Some businesses may take this a step further and check potential supplier and/or customer credit reports before doing business. This is a great way to determine if there is any risk to your business in working with them.

  • Use a brick-and-mortar location.

    Vendors don’t like to see a PO Box on an account application because of the risk of fraud. Many lenders and partners feel the same way; when a business can show that they are established enough to have a physical location that they can send and receive shipments/mail from, they come off as a much lower risk company.

  • Know your industry and how it relates to credibility.

    Some industries see more of an impact from business credit than others. For instance, if you’re a trucking broker your credit scores will be pulled from your shippers and carriers. Brokers must maintain strong credit to enter into contracts and stay in business. If a broker has information reporting that raises a red flag for shippers or carriers, they will not be trusted with brokering the load and passed over to a competitor presenting a lower risk.

  • Be consistent.

    Make sure your addresses, EIN, DUNs Number, Phone Numbers, and any other identifying figures are consistent across all accounts, licenses, listings, and profiles. You want to make sure you’re reflecting consistent information so that creditors and lenders know that it’s being monitored and is up-to-date.

  • Establish business accounts.

    To exist in the world of banking, you need to have open business bank accounts. This will help keep your business and personal finances separate and will help build your bank rating. Your bank rating will be important if you plan on going for a bank loan; it’s not a published rating, you will never see it, and is only used internally within the bank. It is a proprietary score/ranking.  They do not have to share it with you or explain it.

  • Don’t make assumptions, monitor your credit.

    One of the worst things you can do is assume that you have business credit. Order your business credit reports from Experian, Equifax, and Dun & Bradstreet. It’s important to pay attention to all three since they report different information. Creditors may use one or all three reports to measure creditworthiness.

    (Remember: there are a handful of other business credit bureaus, that depending on your industry may impact your borrowing status.)

    Watch for any red flags in your profiles, if you notice inconsistencies speak with a business credit specialist to get more insight. Each profile is unique, some businesses may need business credit repair, building, monitoring, or a combination of the three.