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How to Avoid "Cookie Cutter" Credit

Updated: Feb 3


You probably already know the best way to build up your business credit is to add payment history. If you don't have any vendors or suppliers, you may try to use some of the more familiar trade lines offered up online.

Unfortunately, this can lead to "cookie-cutter" credit where you end up with the same generic payment history as everyone else and nothing of substance that proves your creditworthiness. Believe it or not, using generic suppliers can sometimes do more harm than good.


Trade lines, by definition, are companies who report all business transactions to at least one of the major business credit bureaus, such as Dun & Bradstreet, BusinessExperian, PayNet, Cortera, or Equifax for Business.

In many cases, these "auto-reporting" creditors will provide Net 30 accounts based solely off the fact that you have an existing business credit profile. That's why its important to keep the data in your profile as accurate as possible — so it provides a well-rounded, positive picture of your company's creditworthiness.

In reality, though, you may never have needed to use these companies because your business probably shops more at a local level, and buys more from smaller Mom & Pop suppliers than with the larger companies who would be auto-reporting to the bureaus — and that usually means your regular day-to-day payments to suppliers are never going to magically flow into your credit report to help improve credibility.

FAIR WARNING!

Before you rush out to open accounts with some of the more "popular" companies you'll see people recommend online, you need to know that there is an inherent risk that goes along with their usage, including that one-size-fits-all, cookie cutter look and feel when using the same creditors as everyone else who saw that online post.

D&B and the other business credit bureaus study patterns of behavior. They are constantly on the watch for anything that resembles fraud that can hurt their corporate clients. They are very familiar with the practices of so-called "credit enhancement" companies. And they also know there are companies out there who will charge you hundreds of dollars to "establish" trade lines that are, in fact, free to any qualifying business.

So when D&B sees a DUNS profile that suddenly has payment history flowing in from all the same vendors as 10,000 others used this month, it sets off alarms that your business is trying to pull a fast one, even if its not. Unfortunately, by riding the coattails of someone's online post, you've gotten lumped in with all the fraudsters out there looking to make a quick buck.

If you are going to use what I refer to as the "cookie cutter" suppliers, I recommend that you only use one or two at a time, and that you only make business-related purchases. Over the years, a lot of people have been able to generate a Paydex score by using three or four of these suppliers, but sometimes the payments don't show up in their reports and they end up frustrated.

THE BEST OPTION

The fastest way to build substantial credit for your business may be right in front of you (or behind you) in your file cabinet. The payments you have already made to suppliers, contractors, creditors and vendors are the easiest, cheapest, and most beneficial to building your credit and creditworthiness and — in most cases — they actually carry a heavier weight on your scores.

Think about the things you've already purchased, whether from local suppliers or major nation-wide chains, and then get those payments added to your credit report. Your existing creditors will usually say a lot more about your business and its credibility and capacity than a desperate $50 purchase from an auto-reporting supplier that you are using just to get a Paydex score.

If you are going to spend $200 or more to buy things you don't need from run-of-the-mill suppliers, why not spend less (about $150) for a monthly Creditbuilder, where you'll be able to submit a dozen or more of your existing suppliers to D&B.

Even one-time purchases you've paid at the time of purchase can significantly boost your scores up to 90% so long as it was done in the business name, so it is well worth the cost — especially if you've already spent your hard-earned money on tools, equipment, supplies, vehicles, contractors, rentals, software, and professional services like accountants, pest control, lawyers, and bookkeeping/payroll services for your business.

OTHER AWESOME OPTIONS

On the other hand, if you're shopping for something right now and want to make sure you buy from a company that can help boost your credit at the same time, there are lots more reliable options you can use, and many have local branches right in your neighborhood!


Again, you are likely already using suppliers that relate to YOUR specific industry on a day-to-day basis, and they are going to be far more beneficial because you won't end up looking like your credit has been cut using the same pattern as everyone else's.

If there is something you are shopping for, reach out to me. I may be able to find you a local or national chain provider who will either auto-report or can be manually added to your file. Consultations are always free — 800-918-7505 ext 2.


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