Tips on How to Build Your Business Credit

It doesn’t matter what business you’re in--unless you’ve discovered a unique niche--competition is tough. Everything from selling fast food to making widgets requires you to stay a step ahead of the other guy. One way to do that is to make sure you have good credit. Without it, you could lose out to someone who can more readily modernize their facility and ultimately produce the product quicker and more efficiently. It all comes down to having access to cash when you need it--and having a good credit rating can get make that happen. Following are a few tips on how to build your business credit.

Business Credit Rating

Your business credit rating is a separate issue from your personal credit rating--but there is a relationship. Until you have an established business credit rating, your personal credit history will be factored into your business credit rating. Only after your business has a proven track record will it be allowed to stand on its own; most lenders won’t want to take a chance on any business without established credit. Because you are the face of the business, they will take your personal credit history into account. Their thought process is that if you’re reliable in your personal spending habits, it may carry over into your business practices. If you intend to open or improve a business using credit, you must make sure you don’t have any blemishes on your personal credit history.

Credit Report

Having a good personal credit rating is vital in order to help establish your business credit score, which makes maintaining a good credit rating essential. It would be a good practice to make sure your credit history is up-to-date, and without errors, so you will have a better chance of getting business credit based on your personal credit. Ask for a credit report--it will not affect your business credit rating. As you check over the report, take note of any negative listings. If you suspect a negative report is in error, or the result of identity theft, make every effort to clear up the discrepancy immediately. There is a possibility that a negative report could be outdated. If that’s the case, it can be cleared up simply by updating the information. It is also important to make sure the vendors you do business with are reporting to the credit reporting bureaus--Experian, Equifax, and TransUnion. The more entities that report positive results to the credit reporting agencies the quicker your credit rating will increase.

Pay On Time

In order to build your business credit rating you should make sure you pay your bills on the due date, or before. It is vital to ensure you don’t fall behind and make late payments, because it will adversely affect your credit rating. Paying your bills ahead of time will actually increase your credit rating. If you follow these practices without fail, your credit score will continue to go up.

Use Your Credit

Building business credit works the same as it does for your personal credit score--the more you use your credit, the higher your rating will be--providing you do it right. It would be a good idea to make optimum use of credit when operating your business--but don’t overdo it. Whenever it is possible you should buy on credit instead of paying in cash. Cash payments aren’t reported to the credit reporting agencies, so your score won’t go up. On the other hand, if you buy on credit, but don’t use too high a percentage of the credit that is available to you, your credit rating will go up. The idea is to build your credit score by using credit on a regular basis, but keep the amount you make use of well below what you’re eligible for.

Patience Is a Virtue

Building your business credit will take time. If you are persistent in trying to build your credit score, you will eventually be rewarded--but remember, patience is a virtue. If you try and rush the process by borrowing too much money, it will actually take you longer to increase your credit score than if you do it slowly over a long period of time.

Guest post from Riley Finnigan. Riley writes for Creditscore.net.