8 Steps to Business Credit
Did you read our previous Building your business credit article and end up unsure where to start? We put together this step by step actionable guide to help you get started.
Some of these steps may seem a bit basic, so if you’ve already completed it- just move onto the next step. Now It’s important to take your time and go about this, These steps cannot be completed overnight.
- File your Articles of Organization you’re your State’s Secretary of State. Making sure that your company/business is a legal entity is the first step. If you’re doing business under a fictitious business name, you’ll want to look into which structure will work best for you.
- Once your Articles come back approved by the state, apply for free to get a Tax ID Number (EIN) for your business at https://sa.www4.irs.gov/modiein/individual/index.jsp. Save the PDF document you get at the end with your EIN on it, that number is like your Social Security Number for your business (very important)!
- Open up a business checking account. You will need a copy of your Articles of Organization (stamped as approved with the State) and your EIN to show the banker. I personally like US Bank as they offer free business checking with low minimum balances to maintain. At this time, it is also a good idea to fund the checking account with the amount of money you are buying all the shares of the company for (from #2 above).
- Get your company registered for free with Dun and Bradstreet to get a DUNS Number at https://www.dandb.com/product/companyupdate/companyupdateLogin?execution=e2s1. This process is free if you don’t expedite the service, the free service takes about 30 business days to activate your DNB.
- File your initial Annual Statement of Information online within 60 days after creating your company with the Secretary of State. You also need to file an Annual Statement of Information every year during the month that you incorporated the company. The filing fee is $25. This is just so your business owners and
- Start building business credit by opening a few net 30 accounts. Below is a list of companies/sites you can go to apply for these:
You need to actually buy something and pay for it as soon as the invoice is generated once you get approved for these net 30 accounts to have the information report to Dun and Bradstreet. Your business needs a total of 5 tradelines reporting before a PayDex score can be generated.
- After a few months of working with the net 30 accounts and if your personal credit is fair, you can then try applying for business store cards such as Frys, Walmart, Lowes, Home Depot, Dell, etc. These will generally hard pull your credit so you want to make sure your credit score is in the high 600s to have the best chance of approval. You can also try applying for business gas cards through Shell, Exxon/Mobile, Chevron, etc.
- After you have 2-3 net 30 accounts and 2-3 business store/gas cards and you are paying your invoices/credit card bills on time for a few months, you should see an 80 PayDex for your business at this time. Once your personal credit improves into the 700+ range, you can then apply for traditional business cards from US Bank, Chase, and American Express. These cards will all require your personal guaranty even though they are business cards. These 3 lenders will NOT report the business card to your personal credit unless you default. I advise to stay away from Capital One as they will hard pull all 3 of your personal credit bureaus and they report the business card to your personal credit (not ideal). Keep paying your net term accounts and business cards on time and you will maintain excellent business credit.
So that’s basically the 8-step process. It can take up to 6 months to complete all the steps, but again – business credit isn’t established overnight. If you have any questions, feel free to email us at [email protected]