Coast now reports customer credit performance to the Small Business Financial Exchange (SBFE®). When you pay your Coast card bill on time, you help build credit history and improve your company’s credit score.
Key Takeaways
- Build strong credit to get lower interest rates, better loan terms, and improved opportunities to secure financing.
- Factors that affect your business credit include your payment history, the total amount of credit you use, the length of your credit history, public records, assessed industry risk, and company size and age.
- Improve your business credit with certified vendors by building a strong business foundation, maintaining good vendor relationships, and applying for a business credit card. Once those aspects are in place, keep an eye on your business credit report and exercise good financial habits.
Why Is Business Credit Important?
A strong business credit score helps save money and improve cash flow by getting better interest rates, loan terms, and opportunities to secure financing.
Factors That Affect Business Credit
Payment history: Paying your bills on time, every time, and doing so consistently helps you build a good financial reputation and credit score.
Amount of credit you use: Every credit card comes with an upper limit. That limit is the most you can spend on that particular card. If you’re constantly maxing out the line of credit, it’s going to hurt your credit score.
Instead, try to keep your credit use at around 30%. So, for example, if you have a $20,000 credit limit on a particular card, try to keep your balance at $6000 or less.
Length of credit history: The longer your business maintains credit accounts and a positive payment history, the better your credit score will be.
Public records: Bankruptcies, liens, and legal judgments against your business will drive down your business credit score.
Industry risk: When you apply for a credit card or a line of credit, the lending company will conduct a risk assessment on your business.
Depending on the industry you’re in, the lending company will rate you as high risk or low risk based on things like chargeback rate, financial instability, and regulatory/legal issues.
Company size and age: Larger and more established businesses often have higher credit scores. This is because they’ve built a good reputation with lenders.
That’s not to say that small or new businesses can’t build excellent credit. They just need to exercise good financial habits over several years and make a good name with the rating agencies.
How To Build Your Business Credit With Certified Vendors
Build A Strong Business Foundation
Build a strong business foundation by:
1) Establishing a legal business structure (e.g., Partnership, LLC, or S-Corp)
2) Registering with local, state, and federal organizations
3) Applying for an EIN
4) Opening a separate business bank account
5) Maintaining a separate business address and phone number.
Maintain Good Vendor Credit
Form partnerships with suppliers and credit card companies (like Coast) that report your payment history to business credit bureaus.
Ask for Net-30 terms, purchase small amounts to start, and always pay on time. This will help you build strong credit and a good business reputation.
Apply For A Business Credit Card
Applying specifically for a business credit card is a great way to build your business credit. For more information on how to do that, check out these articles from Coast:
- How To Apply For & Get A Business Credit Card: Step-By-Step
- How To Get A Business Credit Card With An EIN Only: A Guide
Monitor Your Business Credit
Keep an eye on your business credit report so that you understand what lenders see and to spot and fix errors before they hurt your numbers.
Exercise Good Financial Habits
Good financial habits include paying bills on time, keeping low balances whenever possible, not applying for too much credit (or too many credit cards) all at once, reviewing financial statements every month, and keeping business information up to date.
Build Your Business Credit With Coast
One of the best ways to build business credit is by bringing your fuel card and corporate card programs under one roof with Coast’s centralized solution.
You can use Coast to pay for everything from fuel and repairs to office supplies and T&E expenses. We’ll then report your performance to the Small Business Financial Exchange (SBFE®) so that you can build a strong credit score and a good financial reputation.
To learn more about how Coast can help you monitor, manage, and control your finances, visit CoastPay.com today.
Frequently Asked Questions [FAQs]
How does business credit differ from personal credit?
Business credit is tied to your Employer Identification Number (EIN) and other business identifiers (e.g., the legal structure you’ve chosen, the industry you’re in, the number of employees you have, and the payment history you’ve built over time).
Personal credit is tied to your Social Security Number (SSN).
At first, personal credit can have a big influence on business loan eligibility. But, as your business builds a good financial reputation, the lenders will look less at your personal credit score and more and more at your business credit score.
What credit score is good for business?
There are a number of business credit score rating agencies, and each has a slightly different system.
Here is the score range for a few of the top agencies:
PAYDEX: 1 to 100
Dun & Bradstreet: 80 or higher
FICO SBSS: 160 or higher
Experian: 75 or higher
Equifax: 75 or higherRegardless of the rating agency you use, a higher score shows lending agencies like banks and credit card companies that there is less risk of lending you money.
In addition, higher credit scores give your business better access to credit, higher credit limits, lower interest rates, and an improved business reputation.
How long does it take to build business credit?
When you first receive an EIN, the credit score attached to that number starts at zero (or close to it). But, by practicing good financial behavior, you can build that score to a strong number that can open many doors.
It typically takes three to six months of consistent on-time payments for an initial score to register with the reporting agencies. Building a strong score can take anywhere from six to 12 months or longer, depending on your business’s financial behavior, industry, cash flow, and more.
