Self-care: How to Craft an Impeccable Business Credit Reputation

Wouldn't it be nice if business credit built itself? If you never had to wonder if the bureaus had the right information in your business profile? If you could be certain that only your best payment history is reaching your credit report and impacting your scores and ratings? If you know at the moment you submit that credit application that you are destined for approval?

If wishes and dreams were peaches and cream — right?

But the truth is — it's not the peaches or the cream. It's how you put them together. An impeccable business credit report is like that. It isn't going to happen all by itself. You can't just throw all of the best ingredients into a bowl and expect to come out with anything better than a mushy mess. That's especially true if your business has been growing and shifting over the years — morphing from a 'fly-by-the-seat-of-your-pants' start-up to the 'well-oiled machine' it is today.

Stop and think for one minute about how much your business has changed in just the past year. Or the past four years, when we all were enduring a destabilized economy during a disruptive pandemic. Think about the changes you've made. Perhaps you grew or were forced to cut back. Maybe you relocated, or added new projects, offerings, or services. All of that matters.

Ensuring that your credit profile fully represents the company you are now, as opposed to where you were just a few short years ago, sometimes takes a little crafting and tweaking. And the more you put into your corporate credit report, the more you'll get out of it.

Ten steps for crafting an impeccable business credit reputation

1. Start by reviewing your corporate registration at the state level to ensure all of the business details are accurate and annual reports have been filed. Keep in mind... That information is flowing directly into your business credit report and it is visible to any potential creditors. If your registration has outdated information or has lapsed, it will impact your scores and ratings. And if the details don't match what you just put on that credit application, the creditor may think twice about an approval.

2. Next, make sure the commercial credit bureaus have accurate information in your company's profile. A solid credit report will rest on the details, so make sure those details are as strong as possible. Verify the principals are listed correctly. Update the employee count, address, phone and website. Add or remove industry SIC and NAICS codes to make sure every aspect of what you do is being represented, since that is what determines your credit limit recommendations.

3. Add as much positive payment history as possible to your credit file. Both D&B and Experian allow business owners to add payment history to the file. It's relatively inexpensive and just a few new positive payments can make a huge difference.

4. If you have slow payments in your report, dispute them to see if they can be removed. If they can't, outweighing them with more positive transactions is the fastest, easiest and cheapest way to boost your scores and ratings.

5. Talk to your vendors and suppliers to make sure they're allowing you the best possible terms. See if a prepaid account can be switched to Net 30 invoicing or monthly statements. Negotiate high dollar purchases to see if you can get discount terms, such as 2%10Net30. Those discount terms won't just save you money, they could push your Paydex score above an 80.

6. Avoid setting up monthly subscriptions as ACH or auto-drafts, since those will typically get reported to the bureaus as cash accounts or COD transactions. While auto-drafted accounts make bookkeeping a breeze, cash accounts artificially distort the positive-to-negative scoring ratios, and that could make it look like your creditors can't trust you with a terms-based credit account.

7. No matter how large or how small, always buy and pay in the business name. Take the time to create an account that has accurate information about your business. Apply for net term accounts when possible and, if not, then be sure to use your business debit or credit card for all purchases. You may never know which companies will turn out to be an auto-reporter to the bureaus, so just pretend like they all are and take a few seconds to make sure your company is fully represented.

8. If you have a lot of subscription accounts that you need to keep as auto-drafts, consider applying for an expense management card for those transactions. Not only will your payments get made on time, but you get the added benefit of a single ACH withdrawal from your bank each month. Another added benefit? Some expense management cards also report to the business credit bureaus.

9. Track which vendors and suppliers are auto-reporting to the bureaus every month and make an extra effort to ensure those payments are always made 3-5 days before the due date. You may not know it, but payments made to creditors who use third-party payment processors can sometimes take as much as five extra days to get applied to your account. By then, your payment could be flagged as past due.

10. Build legitimate credit, not the illusion of credit. Steer clear of anyone suggesting that you use shelf corporations, buy tradelines, or piggyback off of anyone else's business credit. Those types of short-cuts are an immediate indicator of fraud and that will not only destroy your company's business credit reputation, it can cross-contaminate every other company you own or ever will own in the future.
    

Most importantly — stay on top of it. The moment you think your business credit no longer needs your oversight is usually five seconds before it actually will. The last thing you want to do when bidding a new project, applying for more funding or researching new suppliers is worrying about what's in your business credit report. Our POWERBOOST service provides daily tracking of any changes to your business credit report.