What we can do to help

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1. Register your business

For new business owners, the first step to establishing business credit is to register your business. This process will vary depending on your business structure and where you live. Some states do not require sole proprietors to register if you operate under your own name, for example, but you may still need a local business license.

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2. Apply for a DUNS number

To get a business credit score from Dun & Bradstreet, one of the three major business credit bureaus, you first need a DUNS number. You can request a DUNS number for free on Dun & Bradstreet’s website.

Lenders and other businesses will often use this unique nine-digit number to look up your company’s credit profile and financial health before agreeing to do business with you. A DUNS number is also required to apply for any federal grant.

• Get DUNS

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3. Setup Credit Monitoring Accounts 

To be visible to lenders you have to first create your business profile. A main component in building business credit is to know what information is being furnished by reporting agencies. There are three major business credit reporting agencies that exist, Dun & Bradstreet, Equifax, and Experian. By monitoring your business profile you will be able to keep track of your company's financial health to help you make informed financial decisions.

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• Duns Credit Signal

• Experian Business Credit

• Equifax Business Credit

• NAV

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4. Establish Vendor Accounts

Suppliers often extend trade credit, which allows you to pay several days or weeks after you receive the inventory. This type of accounts-payable relationship can boost your business credit score, provided your supplier reports payments to a business credit bureau. Commonly referred to as Net30 accounts, your business can buy goods and repay the full balance within a 30-day term. The vendors will report those payments received to reporting agencies.

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5. Open a Business Credit Card

Opening a business credit card that reports to the major commercial credit reporting agencies is a great way to establish business credit. You can benefit from perks such as cash back or travel rewards, but you can also use one of these cards to build credit. If your business is younger than 2 years old most small business credit card issuers will use the owner’s personal credit scores (personal guarantor) and income from all sources to determine if you qualify. For seasoned businesses with an established business credit profile some lenders will just use your EIN/Tax ID number. 

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6. Pay all bills on time 

Paying on time is better than paying late and helps improve your business credit score. Late payments can hurt your business credit report, which affects your ability to borrow money. Early payments could mean better credit scores, which is one of the reasons to make all business car payments on time.  

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FAQS       

How Does a Business Loan Affect Personal Credit?

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Does business credit affect personal credit? Nearly every business owner asks this question when considering whether to get financing.

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And the answer is yes; business credit can affect your credit in a few ways in specific situations. After all, they are both types of credit scores.

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However, the two scores can still work together to help you get approved for loans and other types of financing.

 

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Only lenders can affect your credit when they require both personal and business credit scores to approve a loan and report loan payments to both types of histories.

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Likewise, setting up your business structure determines whether the owners are personally liable for business debt.

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#DidYouKnow
LLCs, S and C Corporations keep their personal and business expenses separate.

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Therefore, these business structures offer the best protection to shield the officer(s) and partners’ personal credit histories.

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Lenders that require a business owner to submit personal collateral regardless of the business structure mean that person is personally responsible for the debt.

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In some situations, an owner may declare personal bankruptcy when a business defaults on a loan, adversely affecting their personal credit.

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How to avoid this?

A business owner can use their business assets as collateral to secure a loan so they don’t jeopardize their personal credit.

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Business credit cards approved solely on an owner’s EIN (not an SSN), business name, and business credit score won’t affect their personal credit.

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Are business loans reported to credit bureaus?

It depends on the lender. Before you sign a loan agreement, that’s an important question if you intend to take out future business loans for more significant amounts at better terms.

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#DidYouKnow

You build a stronger business profile when they report timely payments and payoffs to the 3 credit bureaus.

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Situations when applying for a business loan could affect personal credit

• It could affect your credit if you are the guarantor on loan.

• Applying for a business loan could also affect your credit if you use your personal assets as collateral for the loan.

• If you default on the loan, this will also hurt your credit.

• If the business cannot repay the loan, this could also harm your credit score.

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Types of Business Loans That Can Affect Personal Credit Scores

Any loan that a lender approves based on your legal name, address, social security number, and personal income can positively or negatively affect your credit score, depending on your repayment history.

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Business owners use different types of loans to finance their businesses, including personal, term, debt consolidation, payday, equipment loans, and credit cards.

These are typically secured loans where lenders require collateral in the form of personal assets.

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                                                                             How Does a Business Credit Card Affect Personal Credit?

No, business credit cards do not affect your personal credit. This is because the issuer report business credit card activity on a separate credit report from your personal report.

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So, even if you have poor financial management with your business credit card and rack up a lot of debt, the lender won’t affect your individual credit score, but this could change if the lender asks you for your credit when asking for a loan and it’s approved with it.

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What Situations Could Affect Personal Credit By Applying for Business Credit Card?

When a business applies for a credit card, the issuer will often check the personal credit history of the business owner or primary contact.

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That’s why no business credit cards report to personal credit because it depends on the lender.

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However, if the business owner has poor credit, this could affect the approval decision for the business credit card.

 

In some cases, the issuer may approve the business credit card but with a lower credit limit.

Or, the issuer may approve the card but require a higher interest rate or security deposit.

 

Some situations that might hurt your credit score due to a business credit card are:

• They could affect your personal credit if you are a sole proprietor.

• If you are a co-signer on the account.

• If you default on your business credit card payments, this could negatively impact your credit score.

• Closing your business credit card account could also affect you.

 

Types of business credit cards might affect personal credit score

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There are two types of credit cards that can affect your personal credit score.

• The most common type is the Small Business Credit Card. Banks and other financial institutions issue these cards, and they report to the consumer credit bureaus.

• The Corporate Credit Card is the other type of business credit card that can affect your credit score.

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Why Should You Separate Your Personal Credit From Your Business Credit?

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There are a few key reasons why you should keep your personal and business credit separate.

It can help you avoid personal liability for business debts.

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If your business incurs debt that it cannot repay, creditors may look to you as the owner to repay the debt.

 

However, if your company has a separate credit profile, creditors are less likely to come after you for repayment.

It can help you get better terms on loans and other financing products.

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Lenders often view businesses with separate credit profiles as more financially stable and less risky. As such, you may be able to qualify for better terms on loans and other financing products if your business has a separate credit profile. It can help you build a stronger business credit history

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The lender will report a positive activity to the business credit bureaus if your business makes all its payments on time and keeps its debt levels low. Over time, this will help your business build a strong credit history, making it easier to get financing in the future.

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What Is a Business Loan, and How Does It Work?

Business loans provide temporary financial assistance to start or expand a business. Borrowers agree to a lender’s terms and conditions before they receive funding.

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The borrower makes installment payments within a specified period in exchange for capital.

The total repayments include the principal amount borrowed, business loan interest rate, and closing costs.

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Business owners use the funds for business-related expenses. Examples include:

• paying employees

• improving working capital

• purchasing equipment and inventory

• making building renovations

• expanding products lines and services

• and more!

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Business loans for cash flow problems are helpful; use cash to make one-time investment opportunities or pay off credit card balances.

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How to Build Business Credit With Bad Personal Credit?

Building business credit can be a challenge if you have bad credit. However, it is not impossible. There are a few things you can do to help improve your chances:

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1. Get a business credit card – Even if you have bad credit, you may be able to get a business credit card from some issuers. This can help create a positive payment history for your business, which will help build business credit.

2. Use vendor lines of credit – Many vendors will offer lines of credit to businesses, even if they have bad credit. Using these lines of credit and paying them off on time can help build positive trust with creditors and improve your business’s standing.

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What Happens if You Don’t Pay Back a Credit or Loan?

Once the lender reports to credit agencies, an immediate result is that your business credit score and possibly personal will plunge.

Usually, a lender isn’t concerned about one missed payment, but 3 or more alert them of a problem.

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#DidYouKnow
Lenders will notify late payments in your business credit report.

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Negative activity on your credit history prevents you from getting approved for future loans making it harder to obtain working capital when needed.

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In the worst cases, some lenders will try to collect what’s owed by hiring a collection agency or bringing a lawsuit against your business.

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If you offer collateral as part of the loan agreement, the lender can legally take possession of your personal property (a house, car, personal bank account).

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When you can’t repay a loan, your best approach is to work closely with your lender. Be honest with them about your financial situation. Then, you may be able to resolve the issue without ruining your credit and business’s reputation.

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 How to Improve Business Credit Using a Business Loan

A sole proprietorship can use a business loan to improve the owner’s personal credit score even though they use their SSN to report taxable earnings.

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Because sole proprietors use their own credit rather than business credit when applying for a business loan, they can improve their personal credit score when they establish and maintain a good credit history.

They do this by making payments on time and paying off loans and credit cards.

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As their personal score improves, they are better positioned to open vendor accounts, apply for a business card, and qualify for future financing for higher loan amounts at better rates.

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Ways to improve your personal credit score:

• Concentrate on paying off the oldest past-due accounts. Creditors will continue to add late payment fees, which you eliminate, thereby reducing your overall debt by paying them off.

• If you have several accounts to pay off, start with the smallest one first. Once that’s paid, move to the next account until you’ve paid off all your accounts.

• Work with collection agencies to settle outstanding accounts you legitimately owe. Ask them to remove the negative entry on your credit report once you pay the balance.

• While you do this, don’t apply for new credit. You can open new accounts later but pay them monthly if needed. If you can’t do that, don’t open the account.

• Your goal is to pay off each account in full each month or billing cycle. If that’s not possible, pay more than the minimum amount and don’t take on new debt until you can pay off your accounts.

• When you can pay off debt each month, ask creditors to increase your credit limits, lowering your total credit utilization and improving your credit score.

• Programs such as Experian Boost report rent and utility payments to your Experian credit report once you link your bank accounts to the free service.

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#DidYouKnow
Individuals that handle money responsibly receive the highest scores from credit bureaus.

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