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3 Steps to Improve Your Business Credit Report [WEBINAR RECAP]

Creditera Webinar

3 Steps to Improve Your Business Credit Report: Establish, Build & Monitor

Thanks to all the attendees of our August webinar, 3 Steps to Improve Your Business Credit Report: Establish, Build & Monitor, featuring Tim Graczewski from Creditera.

If you missed the webinar, you can view the slides on our SlideShare. The slides are embedded at the bottom of this article for you.

Most business owners understand the importance of a good credit score, but how do you start building your business credit when you don’t quite understand the process?

When thinking about credit score you have to be aware that there are two types of credit scores: personal credit score vs. business credit scores. Yes, your business has a credit score just like you do. If you’re a small business owner, it’s important that you keep your business credit separate from your personal credit. You want to start building your business credit as soon as you launch your business because it can help you get financing and credit, lower costs and save time.

Credit scores come from the national credit bureaus, including Experian, TransUnion, Equifax, Duns & Bradstreet and FICO score provider. If there’s one thing you should know – different scores measure different things in personal vs. business credit.

credit scores

Bureaus use reporting lines to populate business reports. As a small business owner, you should register your business as a legal entity and verify that you show up on public records. If you find out that you’re not listed as a business, contact your lenders and business creditors to get this info sent to the bureaus.

Factors That Positively Affect Your Business Credit Score

  • Debt to income
  • Payment history (Remember to make on-time payments!)
  • Length of history
  • Utilization
  • Business data

credit score

 

Once you get the opportunity to review your business credit report through many of the national credit bureaus, make sure you verify the accuracy of your business data. Mismatched info can lower scores, and that’s not a good option if you want to keep growing your business.

Avoid having a thin file by providing information such as; address, number of employees and business type. A thin file is when there are less than 4 trade lines and lack of information to give you a score, which practically means that your business doesn’t exist.

4 Major Differences Between Personal and Business Credit

  1. Difference in scores
  2. No FCRA protection for business credit
  3. Business reports are more likely to have errors
  4. Payments

Personal credit is highly regulated and consumers have a lot of protection against personal credit. On the contrary, business credit is not protected. You can look up any business credit at any point of time and you can do so anonymously.

As a small business owner, it’s recommended that you look up other contractors or vendors’ business credit to make an informed decision on the the different payment terms you would want to offer (30, 60 or 90-day payment terms). Ultimately, you want to protect yourself from a high-risk business deal.

Most small business owners rely solely on personal funds and credit for financing, and about 72% get denied when applying for financing. This is unfortunate, as according to the Small Business Administration (SBA) insufficient financing is the 2nd most common reason for business failure.

So Why Should You Build a Business Credit Profile?

Establishing a strong business credit profile will prove that you have a healthy business and the access to capital will be much greater. A business can access 10 to 100 times more credit than a consumer, and will use credit at 10 times the rate of a consumer.

Protect yourself. Be aware of your score and stay on top of it. Creditera, as well as other national credit bureaus, offer continuous monitoring of changes in your credit factors, scores and health. You can even sign up to get instant alerts via email or text.

Set Up and Build Your Credit Profile With These 6 Steps

  1. Get your current business and personal scores (2 min)
  2. Incorporate your company (2 days)
  3. Establish EIN (1 hour)
  4. Open a business bank account
  5. Establish credit lines for your business by a) opening a small business credit card and b) get your vendors/suppliers reporting
  6. Get a DUNS number (optional)

NOTE: A big difference between building personal vs. business credit score is that, to have a stellar business credit score, you need to pay early, while to build a good personal credit score, you need to pay off your card by the due date.

3 Last Things to Consider When Building Your Credit Profile

  • Check your business account regularly
  • Dispute if you notice any discrepancies
  • Ensure that at least 4 of your credit and trade lines are reported

creditera business credit

During the Webinar’s Q&A Session, Creditera Shared These Additional Best Practices

  • Personal credit always matters. However, it matters most at first, and less over time if you have established business credit. Business credit will eventually replace personal credit once your business gets big enough.
  • It’s possible to establish good business credit with bad personal credit.
  • Since business credit can take over a personal guarantee with time, don’t put off building your business credit until you have a strong business. Start building now and be aware of your score from the beginning. Make sure your business profile is accurate.
  • Register with one of the national credit bureaus to start your business credit report.
  • You can get a DUNS number through Creditera for free. A Duns & Bradstreet score helps trade services companies evaluate vendor payment terms.
  • Remember to start building your trade lines. Bills for your business will be counted as trade lines.
  • You can build a business credit report within a few months. Time in business, as well as industry and size is an important factor when building credit.
  • It takes about 6-12 months to repair credit score – Be aware of your credit utilization to build personal credit. Figure out which % of your credit you are using. It’s recommended not having more than a 15% utilization score.
  • Check your FICO score to see if you qualify for a SBA loan. Both personal and business credit will be reviewed as part of the qualification process.
  • You can correct business profile information and monitor your credit score through Creditera.

We hope you found the information that Tim provided useful, and that it helped you better understand the major differences between personal and business credit, and why you should start building your credit profile. To learn more about Creditera, visit their website at Creditera.com.

Still have questions about business credit? Let us know in the comments, on Twitter: @KabbageInc, or email us at webinars@kabbage.com. Sign-up for our free small business newsletter to get access to more webinars and business tips by entering your email in the form at the top of the sidebar of this blog.

Thanks for listening in! We hope to see you next time!

Still wanting to learn more about business credit score? View Kabbage’s complimentary Small Business Owners: The Fundamentals of Your Business Credit Score infographic now.

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Kabbage Team

The Kabbage Team is here to not only fund the small business loans you need, but to help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.

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