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Three Ways to Boost Your Business Credit Ratings

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Business Credit Ratings

business credit ratings

Is your company listed with the major business credit bureaus?

Would your company’s credit ratings be considered creditworthy in the eyes of lenders?

Like personal credit scores your business credit scores or ratings play a significant role in the amount of financing your company can obtain. It also affects the interest rates and level of terms a creditor will extend to you.

So a better business credit rating equals greater opportunity, lower rates, and better terms.

Here are three ways you can improve your business credit scores:
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5 Simple Ways to Understand Your Business Credit Scores

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Business Credit Score

One of the most important things you should know creditors look at to determine your company’s creditworthiness is your business credit score.

Does your business have a positive credit file established with Small Business Equifax, Corporate Experian, and Dun and Bradstreet? The reason why this is so significant is because each creditor, lender, or supplier may pull a business credit report from one, two, or all three of these bureaus when you apply for credit.

So, here are 5 ways to understand your business credit score making it easier for you to grasp how the scoring process works.

1) Credit:

The number of trade experiences, balances outstanding, payment habits, credit utilization and trends over time all play a role in what makes up your scores.
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7 Ways to Maximize Your Business Credit Score

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Business Credit Score

 

Let’s suppose for a moment that you’ve taken a few steps necessary to establish business credit for your company.  You got approved for a line of credit with a few suppliers, made purchases, paid your invoices and see the payment experience listed on your business credit report.

After seeing your business credit score you decide to jump into the big leagues and apply for a business credit card without supplying a personal credit check or personal guarantee. 

You’re shocked to find out that your business was declined and you can’t seem to figure out why. You have a favorable paydex score with Dun and Bradstreet so what’s the problem?

Believe me this happens more than you can imagine and because of all the misinformation circulating the internet about what it takes to build a strong business credit score and report many business owners simply throw up their hands and say well at least I gave it a shot. 

First, let me be the one to inform you that in order to qualify for financing other than vendor credit lines you will need to have a strong business credit score and report with all three major business credit bureaus.

Not one, not two but all three!

In addition to getting listed with all three major bureaus you also need to build a strong profile and score.

7 Ways to Maximize Your Business Credit Score

  1. Pay Better Than On Time – Paying your invoices 10, 15 or even 20 days ahead of the due date can classify your business as one that pays ‘better than terms’. This looks extremely favorable on your credit files and can increase your scores.
  2. Minimize Debt to Credit Limit Ratios – Keep your debt to credit limit ratios at no more than 30%. This helps reduce your company’s overall debt exposure. You don’t ever want your company to be perceived as overextended.
  3. Establish Payment History – Making a onetime purchase with a supplier hardly establishes your company’s creditworthiness. You should make purchases using your credit on a regular basis in order to build a solid payment track record. The longer the payment history the stronger the file you will have.
  4. Add Trade References – If you have suppliers that are not listed on your files you can easily add them by utilizing DNB’s trade reference builder program. By adding just a couple of additional trade references with years of payment history you can dramatically improve your business credit score.
  5. Increase Credit Limits – Don’t hesitate to request a credit limit increase with suppliers or creditors that you have a good track record with. But keep in mind, if you’re not utilizing your existing credit lines and using a good portion of the limit a supplier or creditor will flat out deny your request.
  6. Establish a Reporting Bank Loan – Getting a reporting bank loan on your files is priceless and can open more doors than you can imagine. Many creditors realize the scrutiny that banks impose on a company in order to get a loan so simply having one speaks volumes for your company’s creditworthiness. A good strategy is the CD Secured loan which many banks still offer to this day.
  7. Diversify Your Credit Types – This by far is one of the most important factors for a strong business credit score and report but it’s the one that is least discussed. Your company should have a diversity of credit types reporting on its file such as trade credit, revolving credit, lease credit, lines of credit, etc.

By getting listed with the major business credit bureaus and applying these seven strategies you can expect your company to be well on its way to maximizing its business credit scores and reports.

Ready to maximize your business credit scores? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, Banking contacts, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building system helping business owners build small business credit. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Vendor Credit Lines Are Like Small Business Loans

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Vendor Credit Lines

Qualifying for a bank loan or other traditional sources of business financing can seem like an impossible task if you’re like most small business owners that haven’t even begun to establish credit in the name of your business let alone have any type of business credit scores.Vendor Credit

You probably believe that you have no other choice but to use your personal credit but let me share with you a viable alternative before you slap down your plastic.

Vendor credit lines also known as trade credit is when a company extends credit to your company in order to allow you to buy its products and services upfront but defer the payment for a later date.

After you purchase a product they will issue an invoice which must be paid according to the terms of your agreement. If you’re a startup company or have no business credit then most net 30 vendors will have net 10 or net 15 day terms initially. Keep in mind these terms can be extended to net 30, 90 or even 120 day terms if you continue to build a solid payment history with your vendors.

Some of the major benefits include:

  • Conserving Cash Flow – By purchasing products or services and deferring the payments for a later date your business is able to conserve cash and have the funds it may need for other important expenses.
  • Establish Business Credit Scores – As each invoice is paid on time you begin establishing a positive payment history on your company’s credit files. Remember it takes a minimum of four accounts reporting to generate business credit scores on your Dun & Bradstreet business credit report.
  • Improve Credit Capacity – When your vendor credit limits increase so does your company’s overall credit capacity. Larger credit limits showing on your files will improve the overall creditworthiness of your business simply from the fact that banks and lenders will see that other companies are willing to extend credit to you in much larger amounts.
  • No Personal Credit Check or Guarantee – The majority of vendors will not require a personal credit check or guarantee which clearly protects your credit scores and liability.

Now for business credit building purposes there are some key factors that never get mentioned which can make all the difference in the world.

You see not all vendors report your payment history, in fact out of half a million vendors in the U.S. less than 6,000 supply payment data to a business credit bureau.  So either you should select the right companies to apply with or you can always purchase one of DNBs trade reference programs.

Several other factors to consider are the frequency of reporting and how the data is being reported by your vendors. Some report on a quarterly or even yearly basis which does not help in building your profile in a timely manner.

As far as your payment data it’s vital that the actual vendor credit limits that your company is approved for displays on your file not just the amount owed. Some vendors will not report this information and it can have a dramatic impact on how lenders view your company’s creditworthiness plus it affects the size of the credit limit recommendations that business credit bureaus list on your file.

I know this can seem confusing and time intensive but there are ways to streamline this whole process taking all the guesswork and frustration out of the equation. By taking advantage of all the tools and resources available you can improve your company’s ability to qualify for the business financing it needs.

Looking to access vendor credit lines? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

 

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit services membership helping business owners build business credit without personal guarantee. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

How Business Credit Ratings Size Up to Personal Credit Ratings

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Business Credit RatingSimilar to your personal credit rating, businesses also have a business credit rating that potential lenders use to determine its credit worthiness. Unlike the FICO® credit score, there is no universal scoring system lenders use for determining the credit worthiness of a business.

While the majority of lenders utilize FICO® for basing the credit worthiness of a consumer when it comes to businesses lenders take many other factors into consideration. This includes but not limited to your business credit score, company size, annual sales, classification, years in business and financials.

Where a personal credit rating is based on financial information provided by credit card companies, retail establishments, financial institutions and public records a business credit rating is determined by information supplied by the business owner and data gathered from lenders, vendors, suppliers, and other trade accounts.

For this reason, potential lenders may be different from one another in their evaluation of your business’ credit history by emphasizing certain qualifications more than others. Like most industries, there is a specialized language involved with business credit ratings.

The following is a sample of the most common terms used as well as their definitions from Dun & Bradstreet (a business credit bureau):

  • Average High Credit / Highest Credit –In order to put a business’s credit in perspective, these are based on the total amount of credit owed as compared to the industry as a whole. 
  • Business in Good Standing –Includes any problems with the business overall.
  • Commercial Credit Score –A score that predicts the chance of an account becoming severely delinquent within one year.
  • Comprehensive Report –This is a report that includes a combination of several D&B business credit reports painting a more complete picture of your company’s credit history. It includes the results of your PAYDEX analysis, the company’s credit score and Financial Stress class, as well as any public filings or liens, the business’s history and operations (including when it filed for incorporation, annual financial statements, facilities, affiliations, and number of employees).
  • Credit Score Class –This is part of the D&B assessment that gauges payment habits to determine how likely it is that a potential account will be delinquent in the next 12 months. The scoring can range from 1 to 5 with 1 being the score assigned for the lowest risk and 5 for the highest.
  • Financial Stress Score –This is part of the D&B assessment that analyzes the Financial Stress that a business is experiencing in order to predict how likely it is that a business will fail in the next 12 months.
  • PAYDEX –This is D&B’s primary assessment that analyzes how likely it is that a company will make its future payments on time.  Having a paydex score of 80 for a business can be compared to having a 720 personal credit score. In order to generate a paydex you will need to have a minimum of four trade experiences reporting on your DNB file.

Here are a few sample business credit reports:

Dun & Bradstreet business information report sample

Dun & Bradstreet enhanced comprehensive report sample

Corporate Experian Business Credit Score Report sample

Small Business Equifax Commercial Credit Report sample

To order your business credit reports:

Dun & Bradstreet (D&B)

Equifax Small Business Enterprise

Experian SmartBusinessReportsTM

 

I also encourage you to familiarize yourself with the top ten business credit bureaus in the industry. It’s important that you understand your business credit rating and what you can do to build a stronger business credit file. This will enable your business to obtain the financing it needs at the best available rates.

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>
 

To Your Success!

Marco Carbajo

About the Author Marco Picture 2009 Super Small pic

 Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

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