How to Establish Business Credit and Maintain a Good Credit Score

Good credit isn't just a concern for individuals. Businesses should also be concerned with their credit reports.

Being in business has always had its challenges. Meeting a company’s financial needs is, perhaps, more complicated now than ever, so having a good credit score is important.


Establishing Business Credit

Good credit isn’t just a concern for individuals. Businesses should also be concerned with their credit reports.

When working with various vendors and suppliers, showing you can be trusted to pay bills on time may determine whether or not they extend a line of credit, and more. However, once you can acquire 30-day or 60-day terms with your suppliers, you can really begin to grow your business.

The benefits of having good business credit can make a real difference in how fast your business can grow and develop. Here are some quick ideas that can help you establish a good credit score.

  • Incorporate. By developing a corporation rather than a sole proprietorship or partnership, you are able to separate personal from business finances. Your personal credit score means nothing when your business is incorporated. However, you will need to secure a federal employee identification number (EIN), which is the equivalent of an individual’s Social Security number.
  • Establish a credit file. Contact the three business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business) to establish a credit file. They will then begin to track your business’ finances and its dealings with creditors. Next, ask vendors and suppliers to contact the bureaus, as well. Not all vendors will do this automatically, and some are very slow at filing statements. Stay on them.
  • Apply for a vendor line of credit. After doing business with a vendor for a couple of months, ask them to consider giving you a line of credit. This will allow you to get supplies without paying for them up front. This can give your business much more cash flow flexibility and room to grow.
  • Be responsible. Now that you have established credit relationships with vendors and suppliers, be sure to pay on time. While they may be slow in reporting your business’ good behavior, they will be very quick to report negative behavior.


Securing Small Business Credit Cards

Once you have established a good credit history, you might want to consider opening up a small business credit card. This allows you to make purchases with suppliers whom you haven’t yet established credit terms.

Using a business credit card will give you the same advantage of buying materials and supplies up front without a capital outlay. Whether you hold the credit card yourself or entrust it to one of your employees is a judgment call that only you can make.

Of course, in order to get a business credit card, you need to make sure that your business credit report is accurate and reflects good business practices. Every time you apply for a business credit card or other line of credit, the lender will do a credit check to see if you are worth the risk.


Checking Your Business Credit Score

A small business credit score isn’t really any different than your personal credit score. By maintaining a good credit score, you will have an easier time getting larger business loans and better terms.

You may wonder, “What is a good business credit score?” It depends on which rater you gain your information from … If you are looking at the same credit bureaus that report personal credit reports, you will see a range from 0 to 70. The lower the score, the lower risk you are — which means the greater your chances of getting a loan. Others use a rating of A through F, which, like a school report card, an “A” is the best rating and an “F” is the lowest.

In order to find out what your credit rating is, you need to contact each credit bureau to get a copy of your credit report. If you are trying to grow your business credit score, you may want to request your business credit report once a month. Even after you have established a good credit rating, you may want to check your report monthly just to be sure you are maintaining that good rating.


Joy Mali is an active finance blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances.


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