Expert Tips to Build Business Credit

As a business owner, you know that good credit is vital to both your personal and business finances. But what if you don’t have any business credit? Or, what if your business credit score isn’t as high as you’d like it to be?

What does “business credit” mean, and why does it matter?

Business credit is a business’s financial history that is used to determine the company’s creditworthiness. This history is reported by credit reporting agencies and can be used by lenders to decide whether or not to extend financing to a business. Companies must build and maintain good business credit, as it can significantly impact the company’s ability to get funding in the future. Many factors go into calculating a business’ credit score, including payment history, credit utilization, and public records. By improving your business credit, you can make it more likely that you will be approved for loans and lines of credit in the future.

Tips for building business credit

There are a few things you can do to build business credit. Here are some expert tips:

1. Establish a business first.

Your company must be legally incorporated, formed as a corporation, partnership, or limited liability company before you can begin building business credit. Set up a business phone number and a legal name for your company, and you’ll be seen as more trustworthy by vendors and the government. Opening credit accounts with vendors who report to credit bureaus will help you establish your business credit history and get you started building a credit score. Your company’s existence will be known to credit reporting agencies as a result of this action.

2. Find the proper structure for your company.

The business structure you choose will affect your ability to get business credit. Creditors are more likely to lend money to corporations than to sole proprietorships or partnerships. This is because corporations have a better chance of repaying loans, as they are less likely to go out of business and have their assets seized by creditors. Incorporating your company may be the best way to do it if you’re looking to build business credit.

3. Get a business credit card.

One of the easiest ways to establish business credit is to get a business credit card. Business credit cards are available from most major banks and can be used just like personal credit cards. When you use a business credit card, the credit card company will report your payment history to the credit bureaus. This will help you build a positive business credit history and improve your credit score. Just make sure to pay off your balance in full each month to avoid paying interest.

4. Use vendor lines of credit.

Another way to build business credit is to use vendor lines of credit. Many businesses offer their customers lines of credit, which can be used to purchase goods or services from the company. When you make payments on time, the vendor will report your payment history to the credit bureaus, which will help you build a positive business credit history.

5. Pay bills on time.

One of the most important things you can do to build business credit is pay your bills on time. Your payment history makes up a large portion of your business credit score, so it’s essential to ensure that you’re always making timely payments. You can set up automatic payments for your bills to ensure they’re always paid on time.

6. Keep credit utilization low.

Credit utilization is the percentage of your available credit that you’re actually using. Your business credit score will suffer if you overspend, so it’s important to keep your credit utilization low. To avoid carrying a balance, try to keep your credit utilization below 30% and pay off your balances in full each month.

7. Check your business credit report regularly.

It’s essential to keep an eye on your business credit report to make sure there are no errors. You can get a free copy of your business credit report from Experian, Equifax, and TransUnion every 12 months. If you see any errors, you can dispute them with the credit bureau.

8. Use a business credit monitoring service.

A business credit monitoring service can help you keep track of your business credit report and score. This can be helpful if you’re trying to build business credit, as you’ll be able to see how your payment history is impacting your score. You can also set up alerts to notify you of any changes to your report.

9. Establish a good relationship with your creditors.

Establishing a good relationship with your creditors is essential, as they can help you build business credit. If you have a good payment history with a creditor, they may be more likely to extend lines of credit to you in the future. You can also ask your creditors to report your payment history to the credit bureaus, which will help you build business credit.

10. Use a business credit builder loan.

A business credit builder loan is a loan that’s used to build business credit. With this type of loan, you make regular payments to the lender, which are reported to the credit bureaus. This can help you build a positive business credit history and improve your credit score. Make sure only to borrow what you can afford to repay, as defaulting on a loan can damage your business credit.

These are just a few expert tips to help you build business credit. By following these pieces of advice,  you can establish a good business credit history, which will give you access to more financing options in the future. Remember to always make payments on time and keep your credit utilization low, as this will help you improve your business credit score.