Whether you’re starting out or have an established business, the following tips can help you establish and build business credit. First, get a DUNS number (a Dun & Bradstreet number) for your company.
Then, open and use business credit cards that report to the credit agencies. Make sure to pay them off in full and on time.
Make Your Payments on Time
It’s a simple, but important tip: make your payments on time. Payment history is the most important factor in a business credit score, and on-time payments will help your company build a strong payment history and increase its business credit scores.
It also helps to choose a credit card that pays rewards on expense categories that align with your company’s spending habits. And, if you’re seeking a small business loan, make sure the lender reports to a business credit bureau (Dun & Bradstreet, Experian, Equifax).
As with personal credit, building a solid business credit profile requires responsible borrowing habits. If you pay down debts quickly, and use multiple forms of credit, your business’s business credit history and score will improve over time. A robust business credit profile can lead to better small business loan terms and rates, lower business insurance premiums and more.
Keep Your Credit Card Balances Low
If you want your business credit cards to work for you rather than against you, you’ll need to use them responsibly. Keep your balances low and avoid fees by charging only what you can afford to pay off each month. Keeping your credit utilization ratio at 30% or less can also improve your business credit score.
Philp also points out that it’s important to establish an emergency fund so you can cover financial emergencies without having to resort to credit. Lenders may be more willing to lend to businesses with a solid financial safety net.
Similarly, it’s smart to check your business credit report with each of the three major credit bureaus (Dun & Bradstreet, Experian and Equifax) to make sure you have accurate information in your file. It’s a good idea to do this periodically to make sure you don’t have errors that could hurt your business. If you do, make sure you dispute them right away.
Keep Your Accounts Open
Lenders and suppliers want to see that you’ve had a credit history for your business for a while. This can help you qualify for better business loan terms, rates and conditions and even lower business insurance premiums.
You’ll also need to have a mix of accounts, which lenders and vendors prefer to see in your business credit report. While closing accounts can be beneficial for those who are on the verge of a marginal business credit score, it’s generally best to keep your accounts open if you are making consistent payments and avoiding late payments.
Keeping your accounts open will also help you maintain a longer credit history. Remember, not all accounts are required to report to the credit bureaus and some may only report to one or two of them. When in doubt, consider using a service like Nav Business Boost that reports trade lines to all three major business credit reporting agencies. This will ensure that your credit history is being compiled as it should be.
Pay Down Your Debt
Having good business credit is important for many reasons. It can make it easier for your company to obtain financing and can qualify you for better terms with suppliers, vendors and other partners. It can also help you avoid the temptation to use personal assets like your home for business purposes.
One of the most important things you can do to build your business credit is to pay down your debts, especially on time. Late payments can damage your business credit score and send a negative signal to lenders. It’s also a good idea to ask potential lenders whether or not they report payment histories to business credit bureaus.
There are several ways to start building business credit, including opening bank accounts, a credit card and vendor accounts. By following these tips, you can help your business establish a solid foundation for its future. Then, when you’re ready for more financing, your business can apply and get the money it needs.
