Building business credit can be difficult for companies just starting in the market. It’s common to find yourself in a frustrating cycle of needing credit to get credit. New businesses may be discouraged to learn that established credit history is the only way to get credit lines. So, how do you do establish credit in the first place – especially since you need to be approved first?
You can solve the chicken and egg predicament by becoming educated on how credit and credit reporting work. You should also be familiar with a big name in the business credit reporting world: Experian.
Why Experian Matters
The name Experian should mean something to anyone in the business world. As a top agency for tracking business credit card and trade line information – as well as providing it to the banks and credit issuers to help them make approval decisions – it’s nearly impossible to run a growing business without using them as a resource.
Many credit card issuers use Experian in determining whether to approve a small business application for a card. They have developed a seamless process for providing issuers with supporting information from your Experian history to help you apply for cards quickly. Because Experian’s info is so well integrated into the credit approval process, decisions happen faster than ever.
Because so many cards use Experian’s data to make their decisions, it makes sense to want to get cards that report to Experian. How can you identify which cards these are?
Which Cards Report to Experian?
Simply put, all major credit card issuers should be reporting to Experian. As one of the big “three” agencies for both consumer and business cards, Experian leads many of the efforts to protect consumers, secure credit technology, and develop scoring models that more accurately assess business credit risk. If you have an active credit card issued by a major bank, assume that your card is reporting to Experian.
Another way to look at it is to acknowledge that credit data is cyclical, as we mentioned above. The chicken and egg process looks like this:
- Business credit cards use Experian’s credit data to decide if you’re a good risk and can approve you based on Experian’s credit profile of you.
- After you get the card, the bank uses your payment history, usage, and debt to available ratio to report information back to Experian.
- Your credit profile is updated with this new info.
- The cycle begins again.
Each new card you apply for may look at Experian’s data to give you access to more and more credit. This cyclical approach rewards users who apply for cards within the Experian network of cards. These include cards issued by:
- American Express
- Capital One
- Bank of America
- U.S. Bank
- Top airline-branded cards
- Secured credit cards
- Retail cards, such as those issued by big box stores
- And many, many more!
If it’s a major card issuer, expect it to report your payment data to Experian regularly. Your business card may even provide you a free peek at your Experian score as part of cardmember services. Whether you get access to Experian’s Intelliscore ranking or another indicator of your business credit health, expect your major business credit card to report payment info at least monthly to Experian – and perhaps more often.
How Trade Lines and Business Credit Cards Differ
This article specifically shares how to identify business credit cards that report to Experian, but there are other ways to build your credit score: trade lines. These include vendors and suppliers from which you buy raw materials or services to be used in your business. They may or may not report to Experian. If you’re making on-time payments to them, however, it’s in your best interest to get them to report. Experian provides a simple template letter you can send your vendor to encourage them to report your activity to the agency.
Currently, just 10,000 of the 500,000 suppliers who extend business credit today report to any credit agency. Some may report to agencies other than Experian. Being proactive and asking your vendor to specifically report to Experian may be one of the best things you did for your credit. (Note: Small companies with fewer than 50 employees may not be able to easily report to Experian or similar agencies.) Until trade lines reporting become more widely-accepted, expect to work a bit to get your on-time payments reported. Credit cards should continue to report your history automatically.
Steps to Protect and Improve your Experian Score
In addition to paying your lines of credit on time, it’s smart to keep a clean record in all areas of your financial life. Experian doesn’t just use information from credit cards and vendors to develop its score; it also uses data available from independent firms and legal filings in local, county and state courts all over the U.S. Experian may even pull data from public records, corporate financial records, and marketing aggregates.
Keeping a close eye on your credit, taking action to correct any inaccurate information, and balancing a mix of several types of credit lines (vendor, credit card, revolving accounts) is key to keeping your score healthy. Remember that this also includes tracking your personal credit information, since many small business credit cards are tied to your personal creditworthiness. Failure to pay a business line could negatively affect your personal score and allowing your personal credit profile to weaken may limit future opportunities for business credit. To get the best opportunities for vendor financial, small business loans, and business credit cards, check your personal and business scores often, and don’t let errors go unresolved.
Ideally, you’ll want to move to a business-only method of applying for and repaying credit. Separating the two is the best way forward to protect your personal credit profile and gain access to higher business credit loan limits. Experian’s credit score and profile is just one method of assessing the health of your business finances, but it’s an important one that should not be ignored.
This article was originally written on April 4, 2019 and updated on January 26, 2021.