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Business Credit Answers on Establishing and Building Business Credit

Experian Business Information Services was delighted to participate in a #CreditChat tweet chat recently. For the chat, we compiled some answers to frequently asked questions about business credit.

  1. Why should you separate business credit from personal credit?
  2. How do you establish business credit?
  3. Is it possible to build business credit with poor credit
  4. How do you get a business credit report?
  5. How are business credit scores determined
  6. How do you correct or dispute information on your business credit report?
  7. How do you get higher limits for your business credit?
  8. Five tips for establishing, building and monitoring business credit.

Why should you separate business credit from personal credit

If your business ever becomes at risk your personal credit score becomes at risk as well. And so maintaining separation can protect your personal credit profile should a financial mishap occur in the company or vice versa.

Building separation between the two can also help your business develop the credibility that matters the bank’s, lenders, suppliers and partners.

How do you establish business credit?

One of the first things you can do to establish small business credit is to file your business with your State by forming a corporation or LLC to operate your business under and obtain a FIN or EIN number from the IRS.

Of course, comply with the business credit market requirements by obtaining proper licenses state and federal requirements for your business. Also,  act as a business by establishing accounts (telephone utilities, leases, loans) all under the business name, not your personal name.

Even if you operate as a sole proprietor or as a home-based office,  prepare financial statements and a professional business plan.

Be visible. Find companies willing to grant credit to your business without a personal guarantee. This is typically referred to as Trade Credit.

Ensure that your good payment behavior is reported to Experian. Ask suppliers and other businesses that extend your business credit or payment terms to consistently report your payment history to Experian. Also, borrow and then pay on time.  Manage your debt, stay current to your terms by making on-time payments and don’t rely just on small business credit cards. Secure terms from suppliers or take out a commercial loan. And lastly, monitor your business credit report regularly check and correct outdated information. Be alert to important credit changes in your company’s name.

Is it possible to build business credit with poor credit

If you have poor credit, you know, it’s never too early to enable healthy management behaviors of separating personal from business credit risk and building business credit. But in the early startup stages, you may need to personally guarantee payments. But, the more you act like a business by establishing accounts in your business name, the more likely it is that you’ll be able to negotiate and secure good credit terms without personal guarantees.

How do you get a business credit report?

Experian offers instant online access to business credit reports at the following websites:

Experian.com/mybusinesscredit

SmartBusiness Reports.com

These sites easily help you monitor your own report or access a report on other businesses you can purchase a single report as needed or save with a subscription to a plan.

How are business credit scores determined

Experian collects business credit data from a wide range of sources such information is used to create a score that illustrates how your businesses historically met its financial obligations. This helps creditors to decide whether to extend credit to your company. Some of those sources include State Filing Offices, Public Records,  Credit Card Companies,  Collection Agencies, Corporate Financial Information, and Marketing Databases.

If you are curious about the behaviors that impact your credit score you can always access our Score Planner Tool. This is a free tool that Experian offers. You can get in there and do what-if scenarios, modeling your current credit behavior and how that impacts your business credit score. It is a very useful tool and helps you build smart business credit.

How do you correct or dispute information on your business credit report?

First, you must have a copy of your business credit report. You can download that instantly at Experian.com/mybusinesscredit or SmartBusinessReports.com. Of course, review the details circling any incorrect information and you would submit that to BusinessDisputes@experian.com for investigation. That will open a ticket for your case and return to our self-service Web sites for future access and alerts on the case.

How do you get higher limits for your business credit?

You should monitor your business credit report and manage the factors that drive a good business credit score. And doing so can help you boost your credit score and improve your credit terms.

Five tips for establishing, building and monitoring business credit.

  1. Act as a business by maintaining a distinctly separate business credit profile from your personal credit.
  2. Avoid surprises. Be proactive in monitoring your business credit score.
  3. Stay current on payments to creditors. It seems simple but it is great advice that just pay those bills on time. Don’t let them go delinquent
  4. Ensure that your good payment history is reported to the credit bureau. Establish some good strong trade credit lines and make sure you’re doing business with partners who are reporting to the credit bureau.
  5. Use business credit reports to limit your risk of doing business with others such as your business customers suppliers and vendors and partners.

Review your business credit report today