Just like your personal credit history, your business also acquires a credit history based on the transactions made and the loans repaid.
Information about these credit transactions is gathered by business credit bureaus to create your business credit report using your business name, address and federal tax identification number (FIN), also known as an employer identification number (EIN).
The business credit bureaus use this data to generate a report about your company’s business credit transactions. In many cases, those issuing credit to you will rely on your business credit report to determine if they want to grant you credit and how much credit they’ll give.
While personal credit scores range from 300 to 850, with a score of 680 or higher considered excellent, business credit scores range on a scale from 0 to 100, with 75 or higher considered an excellent rating.
In 2008, The U.S. Small Business Administration (SBA) and Dun & Bradstreet (D&B) joined together in a nationwide partnership to give small business owners step-by-step guidance on how to manage their business credit.
Determine if you have a business credit file.
The first step business owners should take is to determine if they have a business credit file with D&B. This can easily be done by calling D&B customer service at 866-785-0430 or visiting http://iupdate.dnb.com/iUpdate/mainlaunchpage.htm.
If you find that you already have a business credit file, review the file and add or modify information as necessary to ensure those looking at the report are basing their decisions on accurate information.
If you do not have a file yet, D&B will let you establish one by applying for a D-U-N-S® number. This unique business identification number will start the process of creating a business credit file.
Establish a credit history.
During the start-up phase many business owners will use their personal credit card to finance business expenses. Try to avoid this. Instead, put all your expenses in your business name and use a business bank account, rather than your own personal funds, to pay your bills. This will help establish a payment history.
Pay your bills on time.
Paying your bills on time is one of the key factors of establishing a good credit score. Be very careful not to overextend your business, and use any line of credit judiciously.
Monitor your file
Since your credit file will change over time it’s important to continuously monitor the file to stay abreast of changes that might impact your relationship with customers, suppliers and financial institutions. Also, make an effort to keep your file current, by updating location, number of employees and other info.
Actively managing your business’ credit can help you secure financing at better terms, make smarter credit decisions, protect your business against identity theft and ensure you get needed supplies at affordable terms. If you need assistance, never hesitate to contact your local MidWestOne banker.