Talking Credit Scores
Did you know your LLC has its own credit score? Like a personal credit score, a business credit score tells lenders the probability that you will repay your debts. Lenders and suppliers use it to determine if they would like to extend credit to you. There are three primary credit report services: Dun and Bradstreet, Experian and Equifax. They will receive reports on your accounts and business data which gives your business a credit score, called a Paydex score.
This score ranges from 1-100; the higher the number, the better. To start building your business credit, you will first establish your company with a Data Universal Numbering System (DUNS) number, a unique identifier that is like a social security number for your business. Once you have a DUNS number, you can establish a company profile with monitoring services such as Dun and Bradstreet, Nav or Experian where you can monitor your score and check for accuracy of your business.
If there are vendors that you do business with and you’ve paid on time, you can request that your payment history be added to your profile. Utilizing tradelines and store credit cards are a great way to start building payment history. Tradelines generally extend net terms and report payment history. They are places like Uline and Quill. You can get store credit cards under your business from Lowes and Home Depot.
This is where you want to make sure to use your DUNS number and link it to your accounts so that payment history can be reported. You can also request tradelines and accounts to be added if it does not show in your business credit report. Your business credit is also affected by public data on your company, such as liens, judgements, the type of industry and number of years in business.
With an LLC, you and your business are separate entities. Utilizing business credit also separates your business liabilities from your personal credit score, protecting your personal score from being negatively affected by big company purchases and a high debt ratio.
Business credit is significant if you need funding for your business or want to get favorable terms with vendors. This can help when you are looking to expand, make big purchases and even when you are looking to sell your business. Maybe none of those things are concerning you now, but having a good credit score can come in handy in case of an emergency, so it is one of those things I would rather have and not need than need it and not have it.
Even though my business is new, I am working to build my business credit and have already improved my business credit score. Like a personal credit score, it takes time and attention to build and monitor your business credit, so make sure to do your research or get a mentor to guide you.