How to Build Up Your Business Credit Score
Last Updated: September 26, 2017
If you own a business, you likely have a credit score based on credit reports that require the same diligent monitoring and maintenance as that of your personal score and reports. Unfortunately, business owners tend to overlook this all-important task, many unaware that a business credit score exists at all, presuming everything gets covered under the personal score and reports associated with their name.
Whether you're well aware of your business credit score, or this is the first you're hearing of it, now is the time to ensure you're doing all you can to maximize its potential. After all, the better your business credit score (ranging from 1 to 100), the better the interest rates you'll get on business credit accounts.
Obtain Your Business Credit Reports
As with your personal credit reports, you can request copies of your business credit reports from the three major credit reporting agencies. You will request it almost the same way as your personal report, the only difference is you will have to input the name of your business and the city and state where the business is located.
It is imperative you review all three credit reports for accuracy and errors. If you do find any errors, you will need to dispute them with each of the bureaus. Much the same as you would for your personal credit history. You can find the step-by-step procedure for disputing inaccurate information in our very detailed credit repair article.
One major difference between business and personal credit reports is that everyone has access to your business report. Reason being is that lenders or potential customers may want to determine your business's reliability before working with you. Further stressing the fact you should review your report for any inaccurate information on a regular basis.
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Verify Lenders and Vendors Are Reporting to the Credit Bureaus
If you don't see them listed in your credit reports, contact said lenders and/or vendors and ask them to start reporting your account activity. The process is very similar if a business was going to report late payments made by a vendor, you can have one of your lenders or vendors report on your timely payments.
For example, let's say you own a business that makes dog beds and you purchase fabric from XYZ Fabrics (a vendor) fairly regularly. At the end of the month, XYZ Fabrics invoices you for the fabric and you turn around and cut them a check. It would be a great to have XYZ Fabrics report your timely payments to all three major credit bureaus so that your credit history will show you pay your bills on time.
Make Timely Payments to Your Lenders and Vendors
Expounding on what we just mentioned above, once you get a vendor to start reporting to the credit reporting agencies, it is important to make timely payments. Not only will these timely payments show up as positive credit, it will also increase your business credit score. So, having said that, if you make any late payments to your vendors that will cause your credit score to go down.
Apply for a Business Credit Card
Using a business credit card for purchases related to your business is preferable to using your personal credit card for a few reasons.
- You can easily distinguish between business and personal purchases because you will have a separate listing from each credit card. You will really appreciate this come tax time.
- A business credit card account can offer you certain privileges you would not ordinarily get with a personal credit card.
If you don't already have one, you can easily apply for one through most of the major banks such as American Express, Chase Bank, Capital One, Wells Fargo, or Bank of America. You can also check with your local credit union to see if they offer business credit cards. As with personal cards, use it regularly to establish activity on the account, but only charge as much as you can afford to pay off by the end of the month. You need not carry a balance for the card to help your credit, but you do need to use it.
Monitor Your Business Credit Score and Reports
Just because you're making timely payments on all your business credit lines, never take for granted that they're being reported accurately. Follow up to ensure lenders and vendors are, indeed, reporting your payment activity accurately. And keep in mind, consumers and businesses alike find errors on their credit reports all the time. Make it a habit of checking at least once a year, perhaps at the same time as your personal score and reports.