Every year, right about this time, I get a lot of calls and emails from people who have gotten snagged in some pretty awful "credit-building" strategies. And apparently, this year is no different.
If you don't know by now, the single, most-impacting step a business owner can take to boost their potential for credit approvals is to add positive payment habits. Unfortunately, some people fall prey to some shady characters who promote even shadier strategies that do more harm than good.
When it comes to adding trade lines, remember Newton’s third law – for every action there is an equal and opposite reaction. (Translation: If you don’t do it right, all the benefits can be reversed instantly, and have devastating results.)
So... instead of letting you fall into some common traps, I've outlined ten common trade line trip-ups to help keep you on a straighter path to success.
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10 COMMON TRADE LINE TRIP-UPS
PAYING FOR TRADE LINES – Opening a business credit account with any company is free. If you are dishing out your hard earned cash to "buy trade lines", you are being ripped off — and it can hurt your business. Companies who sell trade lines are constantly being identified by D&B, and when they are, their customers are the ones who suffer. While they move off to start a new company under a different name and take other people's money, your company will be forever burdened with the stigma of using fraudulent tactics.
TRIPLE VISION TRADE – Variety is the spice of life (and the recipe for success!) Most companies will have a few suppliers they use for their regular purchases and they'll add additional suppliers over time. While you may need one (maybe two) office supply vendors, nobody spends all their money buying green highlighters and Post it! notes from multiple suppliers. Not even office supply stores do that! So why would your ONLY suppliers be in any one industry?
TRADE LINES OUTSIDE YOUR TRADE – Yes, everyone IS going to need office supplies at some point, but your business is also going to spend on the things it needs to run your business. If you are a tire store, you'll be buying tires, tools, and equipment. If you're a restaurant, you'll need food, dishes, tables, and napkins. If you are a truck driver, you'll need parts, repairs, licenses, and fuel. Purchases should reflect your line of business. While the owner of a tire shop may purchase employee uniforms at a specialty store, he most likely doesn’t need a trade line that sells food. Likewise, a mom-and-pop restaurant has their usual shopping list, but is probably not going to spend $1000 for an emergency tool kit for the kitchen.
DAY-TRADING – Who never shops for their business all year long and then suddenly opens a dozen new accounts in one day? Only people who are using some ding-dong's cookie-cutter, flash-in-the-pan strategy. Most of those new "accounts" are going to check your D&B report (or other corporate credit bureau) to validate your business details. If no one has run a single report on your business in the past three years and then suddenly there are 10 inquiries in one day — every red flag is going up, every alarm bell is clanging, and every idiot-light just came on.
ADDRESSING TRADES – I once knew a realtor who ordered products from six trade lines and had each of the orders shipped to a different empty house he managed. Instead of the payments appearing a month later in one D&B report, he ended up with six D&B reports, one for each address. He spent all that money, and for nothing! He thought he was being tricky, but instead, he was the one who got tricked. Your company operates under one name, usually at just one address, and that is the ONLY acceptable information when placing orders with your suppliers. Trade lines should be established in your business name, at your business address, and shipped to your business location.
TRIVIAL LITTLE TRADES – Most business credit bureaus have a set minimum payment reporting criteria. Most companies who report to those bureaus will also have their own minimums. In most cases, if you are spending less than $50 with your supplier, that payment is never going to make it into your report. Some suppliers don't report any payments under $100, and some $1000. So don’t waste your $12.35 thinking you're pulling a fast one, because you're not. If you can’t afford to spend the minimum, you might as well not make the purchase at all. If you are really buying something your company needs, chances are it's going to cost more than fifty bucks.
TRUST YOUR OWN TRADE LINES FIRST – If you have a legitimate business, you are already paying legitimate expenses associated to that business. Those expenses are real, and their coming from your real trade lines! Most of the cookie-cutter quacksters won’t even take the time and energy to look at your existing trade lines and vet their potential to get added to your file because that doesn't fit into their one-size-fits-all "technique". Most of the time, you have already spent a lot more with your legitimate suppliers than you would be willing to spend on someone else's fake ones.
TRADE LINE OOOPS! – The purpose of adding a trade line is to demonstrate your bill-paying responsibility. If you purchase on Net terms from a qualified supplier, be sure to make your payment on time. A failed or late payment, no matter what the reason, will negatively impact your scores and ratings and put you further behind. You can always reverse any negativity by making new purchases that you DO pay on time, but it's so much easier just to pay it right the first time!
TRADING PAYMENTS – Who’s paying the payment on your trade line? All business purchases must be paid by the business itself, using the business (not personal) bank account or credit card. And (even worse) if someone else is paying your bills, your payment habits are a reflection of how well THEY pay the bills, not your company. If these kinds of risky practices are discovered, not only will D&B remove the payments from your file, but they could also block you from being able to add payment history in the future. Just please remember... your company needs to pay its own way.
TRUTH IN TRADING – Do not believe tricksters who offer flash-in-the-pan strategies to get trade lines added to your file. Most of the techniques they will sell you are not accepted by the major business credit reporting agencies. Thousands of businesses each year fall prey to these tactics, and they don't usually come out on top for their bargain. You will lose a lot of money and waste a lot of time in the process. Don't fall for schemes that sound too good to be true. If you have to look over your shoulder to see if you are about to get caught doing something wrong, you ARE doing something wrong. And the last thing you want to do is add your company to their long list of failures.
Bottom line, there are lots of ways to get trade lines added to your business credit profile to help build a strong foundation for your future, and you don’t need to use someone else's risky strategies to get you to your goals.
I hope you'll give me a call if you have any questions, or if you need help because you have already experienced one or more of these trade line taboos. In some case, we can reverse the damage. The call and consultation are always free.