Have you ever been to the market for a home loan or a consumer loan or an unsecured loan? If yes, you will probably have a clear idea on your personal finances and on the terms and conditions of the lending market. You will probably know what your personal credit score is and how your score can have an impact on your borrowing capacity.
However, if you’re a business owner, how would you know anything about the credit rating of your business? Though you may not have an idea of it, yet it is important to know the rating and also understand how to build business credit if your credit rating is poor.
To know about how you can build your business credit, here are a few points that you should keep in mind.
Add your business organization on the map
Simply because you’ve opened your business, this doesn’t mean that your business is already on the map. You need to understand that it is never possible to establish credit until you have put up your business on the map. Manage an official number for your business and get it listed in the business directory. Open a bank account for your business with its legal name and use the account for paying your bills.
Authorize and retain vendor credit
When you enter the world of business, try to maintain a good relationship with vendors related to the industry as these relationships are like gold. The better relationship you share with them, it is more likely to avert paying advance fees for any service or items. In case you secure terms of payment like net-60 or net-90 with just 3-5 suppliers or vendors that report payments to business credit bureaus, you can start building positive credit history.
Get yourself an Employer Identification Number
A federal EIN or Employer Identification Number is the main important identifier for a business for purposes like tax reporting. If you have to alter your business entity to a corporation, you’ll need an EIN. You’ll also need one for creating a bank account in the name of your business. However, you also need to note at the same time that an EIN is never directly related to a hike in commercial credit score.
Be a timely payer
No matter which credit situation you’re going through, you should never pay your bills after the due date. This shows that you are a reliable borrower and you have the ability to effectively handle your payments. If you have a history of late payments, particularly the ones you’re severely delinquent in, this brings down your credit score and has an adverse impact on your business credit.
Open a credit card for your business
When you open a business credit card, this gesture is immediately reported to the biggest commercial credit bureaus. This automatically is a great way to build business credit. So, if you have a business, the foremost thing to do is to open a credit card. However, make sure you use the credit card cautiously and avoid over-utilizing your credit card. Since the credit is available via your business credit card, this doesn’t mean you’ll have to use it.
Keep monitoring your credit
There is an increasingly large numbers of small business owners who don’t monitor their credit reports and hence there are too many errors. If you diligently supervise your commercial credit history, you can spot all the items that are not accurate in your credit report. In case there are errors, make sure you file a dispute with the credit bureaus.
Hence, as and when you establish good business credit, the next step that you need to take is to build strong credit. Take into account all the above listed credit building steps to improve your credit score and build your credibility to grab the best loans.