It’s hard enough establishing business credit for your business. You also have to run the business — buying supplies, making sales, managing cashflow. While there really aren’t any shortcuts to building strong business credit, there are tools and resources out there that can help.
Part of the struggle of building strong business credit is that it sometimes feels like it’s hard to find the answers. Whose advice do you trust? What resources are trying to be helpful and which ones are just trying to sell me products and services?
Here’s a list of some of the best resources to help you build business credit the right way
Setting your business up to be vendor compliant
First things first: the first step to building business credit is to set your business up properly, if you haven’t already. This includes a few things: incorporating, getting your business its own bank account (it’s important to separate your business account from your personal account), and getting started with a credit file.
- Separating personal credit from business credit (Accion)
- Business credit: What it is and why you need it (Fundera)
Building business credit
Once you’ve set up your business for success, it’s time to start building up your business credit score by working with various credit reporting services, vendors, and paying your business bills and invoices on time.
- How to build business credit in 5 steps (Nerdwallet)
- How to build business credit for your startup (Small Business Administration)
- The entrepreneur’s guide to building good business credit (Inc.)
- Zero to 850: How to establish business credit for your SMB (Boss Magazine)
- Dun and Bradstreet’s B2B site on business credit (D&B)
- Credit History on Quora: Quora is a great site for questions and answers. You have to sort through some things but there’s some great advice on business credit from some experienced people. Much of the advice to building personal credit can be applied to building business credit
Building business credit for a small business
It’s hard for small businesses and startups to start building a credit score when they really don’t have any credit history. Without a lot of revenue, SMBs and startups still can find a way to build a good business credit score and establish credit history along the way.
- Building business credit with low cash flow (Accion)
- What is the best way to build credit for my business (SBA)
Credit reporting agencies (CRA)
When a lender or vendor pulls a credit report to determine whether to business with a company, they turn to a credit reporting agency, like the ones listed below. These services create a credit file on a business using public information and information reported to them by vendors.
- Dun and Bradstreet: Probably the most popular credit scoring services when it comes to business credit scores, D&B provides lots of services to monitor and improve your business credit score.
- Experian: Leader in personal credit scoring, Experian is also a leader in business credit reporting.
- Equifax: A global information company, Equifax analyzes data on 91 million businesses worldwide
4 main business credit scores used by lenders
- Dun and Bradstreet’s PAYDEX: One of the most frequently used credit scores, PAYDEX looks at a business’ last 12 months of payment history and scores a business’ payment performance from 1 to 100.
- Experian’s Intelliscore Plus: Uses more than 800 variables, Intelliscore Plus rates business on a percentile basis, scored up to 100, Intelliscore Plus tries to assess how likely a business is to go seriously delinquent.
- Equifax’s Business Risk Score: Equifax’s business risk assessments produce a business’ delinquency scores and a failure score, both of which attempt to determine the likelihood of a business to miss a payment.
- FICO’s Small Business Scoring Service (SBSS): SBSS is based on a partnership with FICO clients, who contribute data used to build ever more powerful models.It looks at cash flow, revenue, D&B PAYDEX Scores and other factors.
Business credit monitoring
- CreditSignal: D&B’s free service that alerts you when there’s a change to your business score and when your business credit file has been purchased. To see the actual changes, you’ll have to pay D&B to access your account.
- Nav: Great service that pulls your D&B and Experian scores, so that you can monitor them for free. Nav also lets you monitor your personal credit score.
Books on establishing and building business credit
There aren’t a lot of bestselling books on establishing and building business credit. Most of the books on this subject are written by service providers in the space and the books themselves don’t appear too professional. That said, there are a few books that have consistently received pretty good reviews for their content.
Business Credit Decoded: Discover the Secrets And Power of Business Credit (Amazon)
Ty Crandall’s book bills itself as an insider’s guide to build business credit for any business. He’s the CEO of Credit Suite, a firm that charges big bucks to help business build strong credit. The goal of the book, states the author, is to help small businesses apply for and get approved for business loans without relying on the strength of their personal credit.
With that in mind, the book quickly explains how the business credit and reporting system works. From there, it focuses on building business credit, vendor credit, and revolving credit in an effort to obtain business financing.
Principles of Building Business Credit (Amazon)
This book goes through the basics of building business credit and provides guidance and advice that readers have appreciated. Most reviews say that this book is a good place to start when you’re at the beginning of the credit building process and you haven’t fully educated yourself on business credit. Many readers who liked the book said the value of the book came from organizing all this information into one book, but they were left wanting more detail and in-depth approach to the subject.
How to Remove ALL Negative Items from your Credit Report: Do It Yourself Guide to Dramatically Increase Your Credit Rating (Amazon)
This book is focused on explaining basic concepts of building personal credit but its advice and lessons drawn can be applied to building business credit, as well. Some of the positive reviews of the book cite its advice on disputing items on your credit report as some of the most valuable.
“The meat and potatoes of this book comes in the chapter ‘How to Remove ALL Negative Items from Your Report’,” wrote one reviewer. “The book goes into detail about how to file a dispute with the credit bureau and then request what is known as a method of verification request. In a nutshell, if the credit bureau’s don’t follow procedures within a certain time-frame (typically 30 days), you have the right to have the information removed from your credit reports, whether it is accurate or not.”
Building business credit courses
Step-by-step guide to getting the business credit you need (Udemy)
This course, created by Darryl Marquette, has a 4.7 score (out of 5) from 36 ratings on Udemy. Since it launched in 2014, over 700 people have taken the step-by-step course that takes a business through establishing business credit, building a strong business credit score, and eventually receiving business funding from multiple lending sources. Many of the higher rated reviews said that even if they knew something about business credit going into the course, they learned something new.
How business scores are changing with new technology
Traditional business credit scores look at a business’ payment history to determine how likely it is to make future payments. This “rear-view mirror” approach really only works for businesses that have a lot of credit history. Those that don’t have credit history typically don’t get scored and have a harder time borrowing money.
That’s all changing as new technology and big data are changing the way some firms calculate a business credit score. In the future, it won’t be just credit history that helps businesses qualify for loans.
- How big data could replace your credit score (Fast Company)
- Can alternative data fix credit score problems? (The Atlantic)
- Alternative credit scores: opportunities and challenges (Tabb Forum)
Business budget templates
Building business credit is really about becoming a responsible business owner. That means spending within your means and treating your suppliers and customers right
Managing cashflows is especially hard in the beginning of a business when revenues are erratic and sometimes hard to come by. Your credit will reflect the health in your business — that, in fact, is really what your business credit score is intended to measure. Running a healthy business should give you a strong business credit score.
- Sample business budget template to estimate income and expenses (The Balance)
- Templates for a startup business budget, small business operational budget and business project budget