Many small business owners use personal credit to run their business.
However, using your own credit could put you at risk if your business is ever in trouble. Plus, many creditors today are moving away from relying on personal credit alone when judging a business’s financial health (since personal credit is not considered an ideal predictor of business behavior).
Smart creditors are taking advantage of new blended commercial scoring tools that integrate both personal and business credit attributes to assess and predict business credit risk.
However, if you are a sole proprietor, your personal credit and your business credit are closely linked in the eyes of banks and other lenders. So it is important to take steps to protect both. You should monitor, evaluate and protect your credit standing just as you would protect any other business or personal asset.
Here’s what you need to know about establishing, building and protecting your business credit:
If your business is new, or if you haven't yet established business credit, obtaining tradelines is a great way to begin building your business credit report.
How to ensure creditors and suppliers can validate your business information:
Once you've completed the steps above, you can request business credit in your company name. Your business trades then are reported to Experian, creating a robust business credit report that gives lenders and suppliers quality information about your company and boosts your ability to obtain loans, increase credit lines and earn more favorable credit terms.
Credit scores are complex statistical models for predicting credit risk. While there is no guaranteed way to improve a business credit score, here are a few steps you can take to ensure that your business credit report reflects the best scores possible for your situation:
Business credit scores range from 0 to 100, with 0 representing a high risk and 100 representing a low risk. Generally, business credit scores above 75 are considered excellent.
Scores are based on a number of factors contained in your business credit report. Your Experian credit score is calculated by a statistically derived algorithm, designed to determine risk based on multiple factors:
Experian® uses standard industry and government guidelines for keeping data on file. Dating data ensures that the information presented in a report is current enough to create an accurate picture of financial health.
You know it's important to check your personal credit report, but did you know it's just as important to make sure your business credit report accurately reflects the status of your small business' credit? The amount of credit and the terms, or rate offered, will be determined by your business credit history and score.
It's also vital that you monitor your business credit for these reasons:
With Experian business credit reports, you can keep track of your own company's business credit in the same way that you monitor your customers and suppliers.
Proactively monitor business credit so you can:
Receive alerts regarding new derogatory information and prioritize risk. Purchase online business credit reports to monitor the health of your small business or to make insightful decisions about prospective business partners, customers and suppliers.
If you need to dispute certain details on your business credit report, please contact Experian Commercial Relations in writing. You will need to provide all of the following:
On the report, circle the specific items in question and provide the correct information. Provide supporting documentation when available.
On current company letterhead, list all variations of your company name and any “formerly known as” names that your company has operated under for the past 10 years.
List your company’s current and previous addresses (physical and Post Office Box addresses) for the past 10 years.
Provide the signature and the phone number of an officer of the company and send to:
Experian — Commercial Relations PO Box 5001 Costa Mesa, CA 92628-5001
Experian — Commercial Relations
PO Box 5001
Costa Mesa, CA 92628-5001