To Protect Your Credit Score BUILD YOUR BUSINESS MUSCLES
Slow-Paying Your Bills The clock runs faster on business credit than on personal loans. While consumer debt typically isn’t treated as late until 30 days after invoicing, business debt payments are considered “late” if only one day overdue. If your uniform vendor’s payment terms are net 15 days and you pay on Day 16, your payment is late — and dings your credit score. Your payment history determines Dun & Bradstreet’s Paydex score and is vendors’ primary information source. If you pay your bills on their due date, you will earn a Paydex score of 80 on a scale of 100. To get closer to 100, you must pay before the due date! Failing to Establish a Business Credit Score Maxing out your personal credit card is a common but ill-advised strategy when starting a business. Not only will you dent your personal credit score, but your business will launch on a weak financial footing. When you launch, open a business credit card, and pay attention to the factors that determine your score. On average, a company uses 10 times more credit than a consumer and can typically access at least that much additional credit. Even if you don’t need a large credit line at the outset, you might need more capital in the future to accelerate your growth. To establish business credit, register for a Dun & Bradstreet Data University Numbering System or D-U-N-S number, a unique nine-digit identification number. You will receive your number within 30 days free of
Building a business can mean long hours spent growing sales, putting out fires, and driving ideas to fruition. Checking your business credit score might not be the first thing that comes to mind as you start your work day, but it can make a significant difference in your ability to accomplish all those other goals. A lack of proven creditworthiness will inflate your borrowing costs and insurance premiums and harm your ability to attract strong business partners and vendors. Here are three common oversights that can put a serious dent in your business credit score and tips on avoiding them. Failing to Monitor Your Credit Check your score frequently with each of the three business credit rating agencies — Dun & Bradstreet, Equifax, and Experian. Look at what is included in your score, whether your business information is up to date, and whether your creditworthiness is weak in any areas. These agencies and other credit reporting agencies can monitor your score and ping you if it changes, alerting you to identity theft or other fraud before your losses mount. Free credit monitoring is available, but you’ll pay a small fee to get a complete look at your score. Every time you check, verify your business’s revenue figures and industry classification. Errors in these areas can hurt your ability to borrow. If your credit report misclassifies you as a “real estate investment firm”
rather than a real estate broker, for example, lenders and other businesses will deem you a riskier business partner. Additionally, mixups happen more easily with business credit scores than personal ones because identifying information is indexed only to your business name and address. If your DBA is similar to another company’s, your business might be confused with theirs, and their financial management mistakes may end up on your report. Build a regular credit report review into your monthly routine to avoid these risks.
charge or within eight days if you pay a small fee. Your payment history, the age of your business credit accounts, and the size of your debt affect your score, ranging from 1 to 100. Trade credit, or the time- payment plans suppliers extend, also shows your creditworthiness. Following these basic rules can help you demonstrate your trustworthiness to prospective business partners and lenders, expanding your options as a business owner and opening more opportunities!
2 CraigHansonCPA.com
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