So what are “Tradelines” anyway? Here’s a hint, they’re all related to your business credit score. You might have heard the term “tradelines” when it comes time for establishing new accounts with banks, but there is more than one type of line that can help build up or maintain a strong history in banking–and they each come with their benefits!
If you are a new small business, find out which option will work best for you as an entrepreneur, check out our other article, “Adding Tradelines to Build Credit For Your Business.”
If you’re a small business owner, tradelines can be one of your most powerful tools for establishing and strengthening that credit profile. A tradeline is an account between businesses that acts like a loan or line-of cash from vendors to companies without any security involved in return! For example, a vendor account offering net-30, net-60, or net-90 terms. If that vendor reports your credit history to a credit reporting agency like Experian, it creates a business tradeline. Of course, this means it’s not really related at all with other types of loans such as personal tradelines (unless they also involve being backed by something), so let’s take some time now to explore what makes them unique before diving into how exactly this works.
Why Tradelines Are Important
The tradeline is a crucial piece of information that helps build business credit. It provides insight into your past payment behavior and future potential, which can’t be seen from just one account history entry or even many entries in quick succession (as long as they’re all recent). For example, the IntelliScore Plus from Experian requires three such accounts for its scoring model.
How to Find Tradelines That Report To Bureaus
Good business credit is often challenging to establish because not all lenders and vendors report to major credit bureaus. For instance, your equipment lease may show up in the Experian database while business credit card transactions might go through Small Business Financial Exchange (SBFE).
Have you ever heard of the term “regular tradeline”? These usually refer to accounts with an established credit history. Companies will offer to sell tradelines as a service for business owners who want to help establish their firm’s reputation quickly.
When a company purchases an existing business, they will often buy it on the promise that their credit lines are about to open up with thousands of dollars in them. However, this turns out not always be what’s happening and is sometimes just another way for people trying to get rich quickly from unsuspecting businesses by playing dirty tricks like these! The supposedly established credit lines may not be the type of funding needed for a new business, so it’s vital that if lenders suspect this scheme, they will quickly shut down those accounts.
Getting Started Building Tradelines
Building good business credit is vital for your company’s future and can open up many opportunities. It more easily allows a business owner to separate personal credit from business credit, which might help potential lenders see how reliable a person or organization would make payments on their loans.
- Establish a business credit card — with a creditor who reports to commercial credit agencies.
- Set up accounts with vendors — or lenders who report to the business credit agencies.
- Pay your bills on time — if you can pay early, event better!
Do some or all of these things, and you will be well on your way to building strong credit for your business and some great business relationships in the process. Be sure to check your business credit report today to make sure there are no surprises should you need to use business credit to obtain financing.