How To Establish, Build, and Access Business Credit

This Month’s Newsletter is brought to you by Business Credit 101!

If you are a business owner or if you are looking to start a new business, one of the most overlooked resources available to you is your business credit. There are so many benefits to establishing and building your business credit including:

Separate Liabilities from your personal to your business
Minimize personal DTI / Debt to Income Ratio
Get access to high limit credit accounts in the business name
Get access to Government programs and Grants
Open doors for vendor, business, and investor relationships
Reduce cost on business insurances and landlords scrutiny
Increase the value of your business for future Sale

Getting Started

The first step in establishing business credit is making sure your business is Credible in the eyes of the banks, lenders, and the business credit bureaus; Dun & Bradstreet, Experian, and Equifax Business credit divisions. There are 10 items or data points that must be in place so that your business is “Credible”.

Tier 1

Once your business is Credible, we then move on to earning a “Paydex” score. To earn a Paydex score you will need 3-5 business credit accounts to report to D&B. At this point, Round 1 or Tier 1 is completed and your business is in a position with a legitimate business credit profile. You are ready to move on to the next tier and qualify for government grants and business funding.

Paydex Score

A Paydex score is a score that is created by Dun & Brad street once you establish a business credit profile on their platform. The first thing you have to do is establish a “credible” business, set up a free Duns number, and then you’ll need 3 to 5 starter business credit reporting accounts that will report to D&B. Once you have 3 to 5 accounts reporting, you will then be issued a Paydex score. Getting a high Paydex score requires strategic payment timing. Your score is from 0 to 100 and 80+ is good 90+ is excellent.

​Keep Building – Tier 2

In Tier 2 you will begin to now have access to more powerful accounts with larger limits. You will be able to access a mixture of Net 30 accounts, Revolving Credit Lines, Retail accounts, and Fleet accounts.

​You are now building your business credit and momentum is on your side. By the end of this round and based on the accounts you set up in Tier 1 you should have at least 7-8 accounts. Reporting on your business credit profile.

You should have an 80 or higher Paydex score. Your business should be easy to find in public records, all of your data points are intact and match across all platforms.

Tiers 3-4

Tiers 3-4 are going to be more of the same from Tier 2, just with access to even bigger and better account options, collectively giving you access up to $100,000 plus of credit. Once you have completed Tier 4 you should have 14+ accounts reporting on your business credit profile.

Our partners at Business Credit 101 can help you from start to finish.

They can save you time and money on your business credit journey by providing you with clear step by step instructions.

Don’t wait until you need funding to start building! Click here to begin with a Free Business Credit 101 Builder Consultation today!

-Erik Kaplan

How to Repair Your Business Credit with THD Credit Consulting

As a business owner I am sure you’re aware of how important it can be to have a good business credit score. In the same manner that your personal scores serve as financial ratings for you as an individual, your business credit scores rank how credit worthy your business is.

A business credit score tells lenders how likely you are to repay them in a timely fashion.  Therefore, having a low business credit score will impact whether lenders or creditors will work with you and can determine whether vendors, suppliers or trade partners will do business with you.

If you have a business credit card for your company, you probably do have a business credit score too. As a business owner, having a good business credit score is crucial to helping you get financing to help with working capital requirements or to fund your business’s ongoing growth.

If you’re a business owner struggling with bad credit and need assistance repairing your business credit… 
Here is what you need to do:

  1. Click here to get your Business Credit Scores.
  2. Request a Free Consultation and to Discuss Fees by calling us at 1-800-822-7120. 
Taking care of your business credit profile is one of the most important things you can do as a small business owner.  It opens up financing opportunities and the business relationships that can help you run and grow your business.

-Erik Kaplan

Tax Liens and Civil Judgments: What is changing and how it affects your credit report.

On July 1, 2017, the three national credit bureaus are going to stop collecting and reporting substantial amounts of civil judgment and tax lien information.  

In fact, the credit reporting agencies will remove this data from reports if the information does not provide complete details on consumers i.e. person’s name, address, Social Security number, or date of birth.

What are tax liens and civil judgments? 

Tax liens are levied against properties when the owner is delinquent on payment of taxes. Civil judgments are ordered by courts in legal disputes, typically involving monetary damages – debts owed by the losing party. Tax liens and civil judgments negatively impacts your credit scores and remain on credit files for extended periods.

How this change will affect you?

A study by credit scoring developer VantageScore Solutions which was created by the three credit bureaus, estimated that 8 percent of consumers would see an average score increase of 10 points on its most widely used scoring model if all civil judgments and tax liens were removed from credit reports. While 8% and 10 points may sound small, in the mortgage business they equate to significant numbers for applicants.

When this information appears on credit reports, it can affect your ability to obtain credit, loans or receiving consideration for employment. This change is a step in the right direction of minimizing the impact of non-loan related items on your credit score.

THD Credit can help!

If you have tax liens or civil judgments appearing on your credit report, give me a call or email me.  We can check out your options for getting them removed sooner.

-Erik Kaplan

Coming Soon!

What is a charged off account and how does it affect my credit?

We are frequently asked about charged off accounts and how it affects credit scores. Here is what you need to know…
 
What is a charge off?
 
When a creditor notifies credit bureaus that it has charged off a debt, it means the creditor has given up on trying to collect an unpaid debt.
 
This would happen when someone becomes severely delinquent (typically about six months without payment) and the creditor writes off the debt as a loss in their own accounting books. Since it is unlikely it will be paid in the near future, it can’t be carried on the books as a current asset, therefore the debt is charged off.
This however does not mean you are no longer obligated to pay the amount owed.  As long as the charge-off remains unpaid, the creditor can continue attempts to collect on the account and that may include suing you for what you owe.
 
How does a charge off affect your credit score?
 
A charge off is a negative mark on your credit and one of the worst items you can have on your credit report.
 
Here’s why:
  • One Charge-off account can take up to 150 points off an excellent credit score. The higher your score was to start with, the greater the damage will be.
  • Once a charge-off is on your credit report, it will remain there for seven years from the date it was charged off.
  • Future creditors and lenders may deny any future credit card and loan applications, if they see a charge-off on your credit report.
 
It is definitely in your best interest to remove charge-offs from your credit report and with some effort we can reduce the negative effects of this type of entry.
 

Call or email us today if you have questions.

 
Erik Kaplan
THD Credit Consulting
erik@thdcreditconsulting.com
(800) 822-7120
Send an email to asktheexpert@thdcreditconsulting.com to submit your questions.

Coming Soon!

What you should know about a credit freeze.

What you should know about a credit freeze.

 

Freezing your credit report can at times be a very necessary tool. It prevents credit thieves from opening new cards and other accounts in your name, and is often recommended when you’re dealing with data breaches and/or identity theft.

What is a credit freeze?

A credit freeze, aka security freeze allows you to “lock” your data at major credit bureaus. Doing this makes it more difficult for identity thieves to open new accounts in your name. The theory being if creditors can’t see your file, they most likely will not extend the credit.

Keep in mind that a credit freeze will not stop an identity thief from using your existing accounts, so you should always be monitoring credit card, bank, and insurance statements for fraudulent charges.

Does a credit freeze affect my credit score?

Credit freezes do not affect your credit score or prevent you from receiving your annual credit report.

What could affect your credit score is being a victim of identity theft. I have seen clients lose over 100 points after falling victim to ID theft. Typically the damage is only short term, because once the fraudulent credit information is removed from your credit reports, your score will jump back. However, this could take weeks and even months.

Should you freeze your credit file?

If an account has been opened in your name or if your Social Security number was taken in a data breach – you most definitely need to freeze your credit report.

With 2015 being dubbed “the year of security breaches” (think Premera, Ashley Madison & OPM) you can choose to have your credit report frozen as a preventative measure before a potential security breach.

However, if you need to get a new credit card, rent an apartment or do anything else that requires a credit check, you’ll have to “thaw” each credit report.

Do you have questions about freezing your credit file?

Give me a call or email me at kaperik@gmail.com.

Until next month,

 Erik Kaplan

THD Credit Consulting | (800) 822-7120