Ready for a challenge? Of course you
are— you’re a business owner after all. How about a challenge to
establish and build business credit in less than two weeks? If you’re
like many of the entrepreneurs we work with at Nav, building business
credit is a task that’s been on your “to do” list for a while, but
you’ve relegated it to the back burner more than once, and it’s simply
not getting done.
We’re going to make it easy for you
by giving you 12 tasks to accomplish in 12 days. (Or you can space them
out and cover them in 24 days— just don’t let them get put on that back
While you aren’t going to go from no
business credit score to a stellar one in just 12 days, once you’ve
checked these items off your list, you should be well on your way to
building a positive business credit history.
1. Make sure your business is legit
Making sure your business is set up
legitimately is the most involved of the steps we’ll describe, but it’s
important for a variety of reasons. To build business credit, you need a
business. While that may sound obvious, the vast majority of small
businesses in the US operate as sole proprietors and many haven’t taken
even basic steps to make sure their business looks (and is) legitimate
in the eyes of lenders, suppliers and business partners. You may have
taken some of these steps already, but if not now’s the time to knock
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If possible, establish your business
as a separate legal entity (LLC or S Corp, for example). You can build
business credit as a sole proprietor but when you operate your business
that way you have no legal protection and some lenders recognize that.
Plus, there may be significant tax advantages to setting up a legal
Make sure you have a business name
that doesn’t infringe on others, or will get mixed up with others—
including in credit reports. Also be sure you’ve decided on your
business address (even if it’s your home address) and get a business
phone number separate from your personal phone number. (Here are some
inexpensive business phone number options.) You can use this this checklist to make sure you haven’t overlooked basic steps for making sure your business is legitimate.
2. Check your credit status
Even if you haven’t done a thing to
build business credit, your business may already be in the databases of
commercial credit agencies. This is particularly true if you have formed
a corporate structure or registered your business with your state; that
information often makes its way to credit reporting agencies and starts
your credit file.
3. Get a DUNS number
A DUNS number is an identifier for
your business in the Dun & Bradstreet database. If your business
does not already have one (your business did not show up in step 2 when
you checked D&B’s database), you can get a DUNS number for free. You do not have to register with Experian or Equifax.
4. Review or pick your NAICS or SIC code
A SIC or NAICS code
is a code used to identify the type of business you operate. It is
important that this information is accurate. Some types of businesses
are considered higher risk and some lenders won’t lend to businesses in
certain industry categories. If your business already has a business
credit report, make sure the SIC or NAICS code listed makes sense.
5. Get a business bank account
This step won’t directly impact your
business credit in the short term, as business bank accounts do not
typically appear on credit reports. However, it will help you in the
long run. Having a business bank account may help you qualify for
business loans or financing in the future, as some lenders will require
you to submit business bank account statements and will review your
business cash flow when evaluating your application. And if you do get
that financing, it may appear on your credit reports and help build
6. Get a business credit card
A business credit card will allow you
to separate business and personal purchases, but more importantly,
should give you a positive business credit reference if paid on time.
This guide explains how major credit card issuers report to commercial credit agencies.
Some small business owners are
surprised to learn that it is possible to get a business credit card
even when their business is new. Usually these applications are
evaluated on the basis of the owner’s personal credit scores, not the
credit score of the business. As long as you have good personal credit
and sufficient income (from all sources), you should be able to get one.
7. Set up autopay for your business credit card
Paying your bills on time is crucial
to building good credit and it’s even more important with business
credit since some business credit scores are based almost entirely on
payment history. So don’t let a bill slip through the cracks and hurt
your credit. Set up automatic payments for your account, even if it’s
just to make sure the minimum payment gets paid on time each month.
8. Get your first vendor account
Vendors are companies that offer
supplies your company needs, such as shipping boxes, cleaning supplies,
printer ink, etc. Some vendors offer net-30 terms to business customers,
which means the bill must be paid within 30 days of the invoice date.
If you establish an account on terms with a vendor that reports that
payment history to commercial credit bureaus, you’ll help build your
business credit— provided you pay on time of course! Here are three vendors that can help you build business credit.
Note: If your business is brand new
and you don’t have a business credit history, some vendors may require
you to purchase and pay for an order in full before they will extend
9. Get your second vendor account
Now that you have one account under
your belt, you’ll want to establish a second one. Applying for numerous
accounts in a short period of time can backfire on you if the lender is
relying on personal credit. That’s because personal credit reports list
an “inquiry” every time your personal credit is checked, and each one
can lower your credit scores by a few points. But business credit
inquiries are not as much of a concern; typically they don’t even
matter. You’re going to need a few accounts to establish business
credit, so go ahead and get a second one.
10. Get your third vendor account
You’ll need three accounts reporting
to Dun & Bradstreet for a D&B Paydex score to be created. If
your business credit card does not report to them, you’ll need a third
account to complete the process. Go ahead get a third vendor account and
buy items your business needs from each one of them in order to start
establishing activity and a payment history.
11. Schedule payments for all 3 vendor accounts
As we mentioned earlier, the most
important thing you can do to build strong business credit is to pay all
of your business accounts that report on time. (Early is even better.)
It may be harder to automate vendor accounts, as compared to credit card
accounts, but you may be able to set up online payments from your
business bank account. If not, put a reminder on your calendar to make
sure the payment is made on time. If you pay by mail, allow at least
seven days to ensure it is received before the due date. Business credit
reports will note if a payment is even a day or two late.
12. Set up monitoring for your business & personal credit
Congrats if you’ve made it through
all 12 steps! You’ll now want to monitor your progress. It may be a
couple of months before your new business credit card and vendor
accounts show up on your business credit reports, so start monitoring
your reports on a monthly basis to see when they appear. If they don’t
show up in sixty days or so, contact those lenders and/or vendors to see
if you can find out why they aren’t reporting.
You can purchase credit monitoring
from the major commercial credit reporting agencies or get an account
with Nav, where you can monitor business and personal credit. (A
standard Nav account is free; premium accounts provide additional
information for a fee.)
As a bonus, Nav’s latest research showed that business owners who regularly used its platform increased their Dun & Bradstreet PAYDEX score by 12 points.
This article originally appeared on Nav.com and was syndicated by MediaFeed.org.
Featured Image Credit: iStock.