Having an awesome business credit score can open major doors for a small business, but before attempting to raise this score, it’s important for businesses to understand WHY business credit is crucial.
To get right down to it, business credit protects your personal credit score, reduces your cost of credit, gives better access to financing and allows for more flexible terms from vendors. Convinced? Thought so. Follow these 5 simple tips to give your business credit score the boost it needs.
1. Put Your Business On The Map
Before you can even have business credit, you have to get yourself listed with the major credit bureaus. Good names to know are Dun & Bradstreet, Equifax and Experian. Be prepared to provide your contact information (basic address, years in business, etc.), your entity information and your financial information.
A great place to begin is with Dun & Bradstreet. Simply visit their site, see if your business is already listed and if not, enter your information and apply for a free D-U-N-S number (which is D&B’s separate credit file number for businesses). This is the number companies will most likely ask for, but be sure to register with Equifax and Experian as well.
2. Get a Business Credit Card
If you’re using a personal credit card for your business, stop. Immediately. Get yourself a business credit card, which is the easiest way to start having visible financial behavior. When looking for the right card, check for the interest rate, credit limit, fees associated with the card, rewards and incentives. Utilize this cheat sheet when shopping for your small business credit card.
3. Apply For Vendor Credit
Ask your vendors if they would consider extending you net terms. Inquire as to whether or not they report payment performance to the bureaus. If they don’t, encourage them to consider doing so. If a vendor can let the bureaus know you’re a great payer, it will have a tremendous effect on your business credit score. Once you have secured net terms from vendors, be sure to pay on time and if you can, pay early. Early payments actually affect your score (for the better).
4. Separate Business from Personal
To reiterate, keep your personal credit score separate from your business score. However, it’s actually super important that as a business owner you also maintain a healthy personal credit score. You’d be surprised how many creditors check a business owner’s personal credit score along with their business’ financial history. How a person can handle their personal finances is a great indicator of how they handle their business financials.
Keep your personal score high by always paying your bills on time, not allowing a huge balance on your credit cards (and not owning too many to begin with), keeping a close eye on automated billing so you know you always have cash in the bank and watching your score continuously to screen for oddities. CreditKarma.com is a great, free way to do so.
5. Keep An Eye On Yourself
Just like you are monitoring your personal score, you should be doing so with your business score. Always be aware of what your report looks like to the people who will be asking for it. Monitor your actual business score, but also keep yourself well informed on all credit transactions. Keep records of terms you have set with vendors, in case of any discrepancies. Always check your credit balances and loan balances regularly. Ask your employees to give you a hand and alert you if they receive any odd mail, emails or notifications that hint at something that could affect your business credit.
What steps have you taken to improve your business credit score?
Thanks for mentioning Credit Karma! I agree that it’s a great suggestion to keep your personal credit score safe, especially as your business is growing.
Gladly Bethy! I love Credit Karma, use it for my own personal use!