Enhancing Your Payment History
By now, you probably already know that you need payment history to boost your business credit scores and ratings. What you might not know is that you need that payment history to come from a variety of suppliers across an array of industries and resources to get the most benefit and convert those excellent credit scores into excellent credit approvals. Any business can show a history of paying their bills on time. Companies do it everyday — and usually by accident.
But knowing which suppliers, industries, and reporting habits will benefit you the most seems to evade even the most savvy business professionals. So I'm going to take some of the mystery out of the matter by letting you in on eight tips and tricks you may not be aware of.
#1 - Variety is the spice of credibility — While having four office supply resources may give you a Paydex© score, it isn't going to benefit your scores as much as having two office supply sources, a paper distributor, and a printing company / or two auto parts retailers, a tire store, and a web service provider / or two computer retailers, an electronics supplier, and a repair technician. You need variety to show that your business is strong and viable. You need more than just "payment" history, but rather should aim for "transaction" history with a variety of trade lines that actually pertain to your business and industry. #2 - Who you buy from matters — There are thousands of vendors, suppliers, agents, retailers, creditors, and lenders who auto-report payment history to D&B and/or the other corporate credit bureaus. Using just a few of these companies helps to provide an ongoing, constantly refreshing payment history that is an awesome boost to the Supplier Evaluation Risk rating and Delinquency Predictor Score. But don't forget about your regular suppliers! If they have a D&B file of their own, they may qualify to manually report your prompt payment history to D&B once per year, which helps to boost your Credit Limit Recommendations and D&B Viability Rating. You can check for your suppliers in D&B's system by performing a search at www.DandB.com. #3 - Prompt payment habits pay off — Never, never, never pay a bill past due. Even if there is dispute on an invoice, a product that has been returned for a credit, or a purchase that didn't meet expectations. Nothing should stand in the way of your company paying its debts on time. You can always go back to the supplier to correct the error after payment has been made, but just one negative payment history can scrap an otherwise perfect report. You will continue to have the benefit of a strong ongoing vendor relationship and a solid business credit score if you have taken care of your financial responsibilities first. #4 - Who banks on your payment — If you are making payments using your personal bank or credit card, in most cases, those debts and payments will reflect in your personal credit report. And who wants to carry their business debts on their personal FICO© score? If you want your business to be successful, you need the debt and payment history to be the responsibility of your business. You should never make any business purchases using your personal funds. Reimbursing yourself later for business expenses does not count toward your business credit. The payment has to be made using your business financial resources if you want it to impact your business credit scores and ratings. #5 - Tracking payments onto your file — You know better than anyone where you have been spending your money, so if you suddenly see a new payment show up in your file under "lithographic printing" you know the supplier you recently purchased from is an auto-reporter to that particular bureau. Make a note of that so you can re-use them again in the future. Since payment history will only stay on your credit report for 24 to 28 months, it's important that you maintain a healthy relationship with the suppliers who have reported your prompt payment habits in the past and can potentially do so again in the future. #6 - Watch for a DUNS opportunity — If you open a new online account or apply for credit and the supplier asks for your D&B D-U-N-S© number, you can count on the application generating a new inquiry on your D&B file. What's more, you can usually count on any payment you make to that creditor as potentially appearing in your credit report. Most companies who trust a specific bureau for credit history before extending credit will report payment history back to that same bureau in the future. You should take advantage of these opportunities whenever they arise and make the most of them with additional purchases in the future. #7 - Meet the minimums — You can make a dozen small purchases from your potential trade reference and never see the payment reflect on your credit file. This is because no credit bureau will show payments that don't meet a minimum threshold. Some suppliers do millions of dollars in small nickle-and-dime sales per month, but credit bureaus, for the most part, will not post any payment that falls beneath their accepted criteria. It's for this reason that some companies only report payments of more than a $50 to the bureaus, while others may have a $125 or $250 minimum requirement. #8 - Don't be afraid of prepaying — While net accounts will have the biggest benefit to your business credit scores and ratings, you should never turn down an opportunity to boost your credit and viability by using prepaid accounts. There are some suppliers who report their prepaid and COD customers to the bureaus right alongside their net customers, and these payments can often have a positive impact on the Paydex© score, D&B Viability Rating, Supplier Evaluation Risk rating, and Delinquency Predictor Score. The most important thing to remember is every payment matters in one way or another. You are in control of how much it matters. If you need help, call me directly at 800-918-7505 ext 2, or you can book an online appointment and schedule a time that will work best for you.