Maybe you’re about to apply for financing or business insurance. Or perhaps you’re vying for a government contract or major deal with a larger company. There are any number of scenarios where your business credit may be reviewed, and you certainly don’t want it to be a roadblock.
In fact, if your business credit scores are anything short of excellent, here are four basic steps you can take to help improve your business credit fast:
Register Your Business
If you have been running your business as a sole proprietor— perhaps even using your personal bank account and personal credit cards— there may be no information available about your business showing up in commercial credit reports. Unfortunately, having no business credit can be just as detrimental as bad business credit in certain situations.
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Check to see if your business already has a credit file with credit reporting agencies like Experian and D&B. You can do this by visiting each agency’s website, or get both business credit summary reports for free at Nav. If your business doesn’t show up, it’s time to shop hiding. Register your business with your state’s Secretary of State. Once you’ve done that, request a free D-U-N-S number from Dun & Bradstreet. (Use this free checklist to help set your business up properly.)
Get a Business Credit Card
Get a business credit card and pay the bills on time, and you’ll build a positive business credit reference that can help you build stronger business credit scores. Most major business credit cards report to at least one business credit reporting agency. As an added bonus, you may protect your personal credit as well, since most business credit cards don’t appear on the owner’s personal credit unless they default. (This chart explains which business credit cards show up on personal credit reports.)
Add Credit References
Credit scores help lenders understand how you’ve handled credit in the past and how likely you are to pay on time in the future. But they aren’t crystal balls. There has to be some information about past payment history in order to make those predictions.
So along with getting a business credit card, take the time to beef up your business credit with three or four accounts that will be reported. These can include more traditional accounts like business lines of credit or loans, as well “trade” or “vendor” accounts. The latter are often easy to get. You can purchase items your business will use (shipping or office supplies, for example) on net-30 terms, which means you have thirty days from the invoice date to pay the bill. If the company offering terms reports payment history to the business credit agencies, you’ll build valuable credit references. (Nav’s BusinessLauncher tool can give you the names of companies that report—check the tools tab of your free account.)
Once these credit references appear on your business credit reports, they will be included when a credit score is calculated. Pay on time, and your business credit scores will benefit.
Mistakes on business credit reports aren’t uncommon. It’s easy for businesses with similar names to get mixed up with each other, for example. Simply checking your business credit reports may turn up mistakes or inconsistencies that need to be corrected.
Disputing incorrect items may result in an update or the item may be removed from the credit report altogether. Commercial credit reports are not covered by the same federal law that requires most personal credit report disputes to be resolved within 30 days. So if you do dispute something on your business credit, keep good records. If you haven’t heard anything in a month or so, follow up to check on the status of your dispute.
Resolve Public Records
Business tax liens, judgments and UCC filings are all a part of the “public record,” – information that is available publicly, often through courthouse records. If your business credit report shows these types of items, pay close attention. They hurt your business credit scores, so look at ways to put them behind you.
One option is to pay or settle the debt. Paying a tax lien or judgment won’t automatically remove it from your credit reports, but it can give a prospective creditor more confidence knowing that an unpaid tax lien or judgment won’t prevent you from paying other bills. (Here’s how to get tax liens removed from credit reports.)
UCC filings are another type of public record information that may appear on your business credit report. They indicate a creditor has interest in some or all of your business assets. If you’ve ever leased equipment, or taken a business cash advance, the lender may have placed a UCC filing. Sometimes, however, lenders can be slow to file a notice when they debt or lease has been satisfied. So make sure these are still valid. If not, contact the lender or lessor and ask them to update the public record.