Here Is How to Establish Business Credit
Good business credit is as essential as good personal credit. It allows you to obtain financing with more flexibility and better terms so you can effectively pay your bills, hire personnel, and grow your company. Here are some strategies that can help you establish and build business credit.
Cover the Basics
The separation of your business and personal finances is essential. With this in mind, once your company has a physical address and phone number, make it a separate entity by incorporating and licensing it. Open a bank account and credit card account in the name of your business. This assists you in establishing a distinct payment history. Your payment history will be further consolidated when you apply for and receive a Federal Employer Identification Number (FEIN) regardless of whether or not you have employees. This will help with your company’s tax filings. Initiate a history of business transactions by opening credit accounts with your landlord, utility companies, and vendors. Be sure that all business credit activities are reported to the major credit bureaus of Equifax, Experian, and Dun & Bradstreet.
To be able to raise your business credit score or keep it at a high level, you need to be aware of what goes into creating this score. Important factors include the length of your company’s credit history, the types of credit you utilize, your credit utilization ratio, and your history of on-time or late payments. Knowing these details will help you come up with specific plans for improvement.
Form Good Financial Habits
Always pay bills on time, because late payments will negatively impact your business credit score. Keep your credit limits high so your credit utilization ratio remains strong. You should never use more than 30 percent of your available credit. Be sure to periodically monitor your company’s information at the credit reporting agencies. This will enable you to detect and correct any errors or unauthorized intrusions into your accounts.
For more advice on establishing and improving business credit, contact Charis Commercial Capital.