Business Credit 101

You want to make sure to build a strong business credit, especially as a new company. It is important to make payments on time and to monitor your credit history. Credit is easy to destroy and hard to recover. Make wise business decisions from the start. Bad credit can lead to higher interest rates and insurance premiums and less favorable payment terms. Strong credit can help you secure loans and attract new business. Anyone can gain access to your business credit report. You want to make sure you make a good impression.


Building Business Credit


There are three main credit bureaus that collect data and create credit scores. For businesses, credit scores are much less streamlined than personal credit scores. Each bureau uses different formulas and reports different types of data. It is wise to maintain all three since you never know what bureau will be checked by lenders, vendors and potential customers. Make sure your business profile is complete on each platform.


If your vendors allow trade credit, establish and maintain these trade lines. Ask these vendors to report your payments to a bureau. If you stick to the terms of your trade agreement, this can really boost your credit score. Even if they don’t report to a bureau, suppliers as trade references on your account.


Always make payments on time or early. This is especially important when it comes to payments to creditors. Start establishing your business credit early. Longer histories tend to be more favorable. While using your lines of credit can help build a credit history, you want to avoid maxing out your credit limit. You should try to limit your spending to 20 to 30 percent of your limit.


If you are intent on building your credit, seek out lenders that you know report your payments to bureaus. Most banks do, but if you have bad credit already, you may be unable to obtain a bank loan. Before taking out a small-business loan, ask your lender whether they report or not.


Negative marks on your public record can haunt you for many years. Bankruptcies may affect your business credit for up to ten years. Tax liens, judgments and collections stay on your credit report for up to seven years.


Building a strong credit can provide you many positive benefits. A good credit score means lower-interest small business loans and business credit cards. Suppliers typically offer better terms for businesses that are able to show a strong credit. A good credit score can even bring in new business.

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