Ideally, business owners think about credit before they start a company. A business’s structure can affect how lenders or potential business partners judge its credit outlook. To structure your business in the most advantageous way, we recommend following these four steps:
- Establish Your Business as a Separate Entity
Separation of owner and enterprise is often the best approach when looking to establish your business credit. As a corporation or limited liability corporations (LLC), your business will be classified as an independent entity, helping reduce a connection to your personal credit. If your business exists as a sole proprietorship, your business’s credibility may be linked to your personal credit. As a result, lenders and potential business partners may rely on your personal credit score to judge the business. - Register for a Dun & Bradstreet D-U-N-S® Number
This will be the number some lenders and potential business partners use to check your business’s credit profile, so you’ll want to have it available before applying for a loan. - Get an Employer Identification Number From the IRS
An Employer Identification Number (EIN) is required to file your company’s taxes. Banks and potential business partners can also request it when you fill out paperwork. You can apply for a free EIN with the IRS. - Open a Business Bank Account
Opening a separate business bank account can be another way to strengthen your business’s independent identity. A business account can also help you build a track record with the bank. If and when you do apply for credit, you’ll come to them as an existing customer.
Once you’ve followed these steps, credit, vendor, or supplier payments you make can count toward your Dun & Bradstreet credit scores and ratings.
How Can Low Business Credit Scores Be Improved?
If your business credit scores are low, there are a few steps you can start taking now to potentially help them improve.
Make Sure Your Business Credit File is Up to Date
Check your business credit file regularly or monitor your business credit to make sure the information in it is up to date and submit correction requests to any errors. You can even dispute payment experiences in your file that you believe to be inaccurate.
Make Payments on Time
Your business should strive to make all payments on time (or early) in order to help avoid the appearance of financial stress on your business credit profile. Why? Because lenders want to know that they’ll get a return on their investment, and potential business partners want to know that you’re reliable.
Failure to pay invoices in a timely manner can lead creditors to submit negative reports to the business credit agencies. A history of delays or defaults can damage your ability to obtain credit or prove your credibility to another company.
Supply Payment Experiences to Dun & Bradstreet
Some of Dun & Bradstreet’s business products give companies the ability to manually submit trade references that can report their payment experiences with your company to Dun & Bradstreet. These payment experiences can impact your Dun & Bradstreet scores and ratings, so you want to be sure to pay your vendors on time or early to help build positive business relationships.
How Can I Check My Business Credit Score?
You can find business credit reporting agencies online that offer various tools and products that can help companies not only check, but also monitor and seek to manage their scores and ratings.
Dun & Bradstreet offers products specifically designed to help businesses understand and monitor credit on themselves and their business partners— everything from single business credit reports to full-service solutions aimed at helping you grow your business. Start today by signing up for CreditSignal for FREE.*
