How to Build Business Credit and Bad Personal Credit

Having bad personal credit, admittedly, it is not easy to build business credit. But it can definitely be done the right way.



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Here are some tips on how to use business credit and bad personal credit to make you a better borrower.

Enter your EIN

A good start is to establish an Employer Identification Number (EIN).

This is a nine-digit number issued by the IRS to businesses operating in the United States and American Territories.

The EIN is used for many purposes, including “filing corporate tax returns, opening a business bank, applying for licenses and permits, and applying for business loans,” explained by the Small Business Administration.

Having an EIN is useful because it gives you another way to get business lines of credit, and you can open a business bank account instead of using your personal information.

An EIN kills two birds with one stone as it will help get your small business off the ground and also be a bad credit solution.

So if you haven’t set one up yet, now is a good time to do so. You can find all the information you need apply for an EIN here.

Register with Dun & Bradstreet

While the three major credit bureaus for personal credit reporting are Equifax, Experian, and TransUnion, it’s a little different for business credit.

Information is still being reported to Equifax and Experian. But, instead of TransUnion, the other major credit reporting agency is Dun & Bradstreet, among others.

Another important part of establishing business credit is to register with Dun & Bradstreet where you apply for a Social Security Number (DUNS).

It is free and easy to do and can be done through the Dun & Bradstreet website here.

Just complete the four basic steps, and once your information is verified, you’ll receive your nine-digit DUNS Number.

Once you receive it, lenders and credit bureaus will use it to verify your legal status as a small business owner from the Dun & Bradstreet Database and evaluate your credit information.

This, along with setting up a business bank, is important in “legitimizing” your business. It should also open up opportunities to partner with other companies and put you on your way to building business credit.

In turn, you should increase your chances of being approved for a small business loan, business line, line of credit, and other types of business financing. This brings us to our next point.

Request for Trade with Your Customers

Marketing can help many small businesses. But they can be especially helpful for new business owners who are just starting out and need to get a license under their belt.

Even with bad credit, line of trade It should be a reasonable way to start getting credit cards, which will get you moving in the right direction.

With customer trade lines, you set up an account with a customer that has payment terms where bills must be paid at an agreed time.

Under net-30 terms, for example, you have 30 days to pay the bill. With net-45 terms, you have 45 days to pay. With the net-60 terms, you have 60 days to pay, etc.

As long as you pay on time and report the customer to a credit bureau, your bad credit should begin to decrease and your credit score to increase.

And as you make a habit of making quick payments, your business credit should continue to grow, eventually helping you break even. bad history.

Just make sure that the customer reports payments to the business – at least, choose those with short payment periods, because this will help you build credit quickly.

Apply for a Business Credit Card

One of the main factors for determining business credit is payment history. In fact, many experts agree that this is more important than the total weight.

Aside from paying your business bills on time, another good way to pay off debt fast is to apply for a business credit card and use it wisely, not just making your payments on time but on time. first.

Also, just like a personal credit score, credit utilization comes into play here, so you want to keep the using your credit card.

A combination of quick payday loans and low-cost credit can quickly build good business credit and reverse a bad personal score.

Just note that you may have to opt for a approved credit card first if you don’t qualify for an unsecured credit card.

Be sure to report your approved credit cards to the business credit bureaus and no to personal credit bureaus. Not many approved credit cards report to the business credit bureaus, so it’s important to call.

When you are just starting out, you may also need to be sure that there is a higher interest rate than you want from a lender.

But once you improve your business credit, your options should increase and you may be able to get a better credit card with better terms and conditions.

Pay Your Business On Time

Again, payment history is the single most important factor in determining your credit score.

Just as it’s important to pay a line of trade, business loan, and credit card bills on time, you need to get used to paying your business on time.

And whenever possible, go the extra mile and pay in advance to stay ahead of the game.

Establishing strong business credit is about creating a virtuous cycle of good credit.

Staying on top of bills helps you avoid falling into debt and defaulting on payments. Therefore, you should be a more attractive borrower to lenders who should help you negotiate better terms for business loans and repayments.

In time, this can help you achieve a good business score and can also give you access to the best business cards.

While it can be difficult at first when you are trying to work your way through bad personal debt and earn income, it should get easier over time.

Monitor Your Business Credit Report Over Time

Just as important as regular monitoring of your credit is, so is your business credit score.

That’s why you should make it a habit to regularly monitor your business credit report so you know what’s going on with each of the major credit bureaus.

Doing this has two advantages.

First, you will be given a basic analysis of how you are doing your business credit and what your overall schedule is.

Although you may not be in a good position at first because of your bad credit, your path should be expected to improve with time, and you will know exactly where you stand.

Second, you must be able to identify any misinformation and catch errors.

Although the major credit reporting agencies do a good job of reporting credit, sometimes mistakes happen.

If there is a problem, staying on top of your business credit report should ensure that you find it quickly so that you can dispute an error before it does damage. your credit score.

The only way to contact the credit bureau that made the mistake is through an official letter.

Continue Working on Your Personal Credit

Although your credit may not be good right now, it doesn’t mean it has to stay that way for a long time.

Your debt – both personal and business – is constantly changing, and it’s never too late to right the ship.

This starts with first understanding which factors contribute to your specific score, which, according to FICOzero:

  • Payment history – 35%
  • Total Debt – 30%
  • Length of history – 15%
  • Blended Credit – 10%
  • New Credit – 10%

Another part of the equation is following best practices, such as:

  • Continue to make payments on time or early
  • Keep your credit utilization to no higher than 30%
  • Sort out your credit
  • Closing credit card information (adds to your credit history and lowers your credit utilization
  • Applying for too many news stories at once (can be a red flag to lenders)

I spoke with Forrest McCall, a financial expert and founder Don’t work another daywho emphasized a more personal approach to building credit, “When it comes to managing your own credit, it’s all about comparing yourself to where you were a few months ago. , instead of comparing yourself to others.”

McCall recommends taking care of your credit over time and making small changes to the way you manage your finances so you can start to see your score improve.

You may also want to apply for a credit card extension if you are a creditworthy borrower because you should thereby reducing your use of credit.

That way, you should be able to improve your personal score while building good business deals for a win-win.

Final Thoughts

Building credit as a business owner with bad personal credit is definitely a challenge. But it is not an insurmountable problem.

Even if personal finances are not good, knowing what to prioritize and having a clear plan should help you quickly build business credit and set the tone. for building a successful company.

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