Updated: Feb 4, 2022
Hindsight is always 20/20, which is why most successful small business owners say their biggest mistake was using personal credit to support their company's financial needs. If you are struggling to achieve business credit for your small business, you may want to see if you are guilty of making any of these most common mistakes.
SEVEN COMMON COMMERCIAL CREDIT-BUILDING BLUNDERS
1) Failing to establish a D&B DUNS number and "complete" profile for your company
Even brand new businesses that have yet to get their feet wet can get business credit — whether from vendors, suppliers, credit card companies, or equipment/vehicle financiers — so long as they start by creating a solid business credit profile with D&B and the other commercial credit reporting agencies. If you'll notice, I emphasized solid, because just "getting a DUNS number" does not guarantee the D&B profile is complete. You need to have specific information in place to have a complete profile, and that doesn't usually happen on its own.
2) Failing to get an EIN number in the company name and at the company address
Your company is going to need an EIN number. While you probably won't need it right away, but it will eventually need to be included on some of your business credit applications. You'll also want to have that number handy when creating your business bank account. Establishing your EIN number helps to validate your business, and being established at a date close to your official start date sends a strong signal of savvy (and responsible) business management. You can order an EIN online at no cost at www.IRS.gov, and you'll have the number within about 10 minutes.
3) Failing to establish a business bank account in the company name
You should not make a single purchase for your business until you have created a business bank account. You'll need your corporate registration and EIN to do so, as well as your personal proof of identity and some cash you can deposit to activate the account. Many of the most basic products and services you'll need to start your business will get auto-reported to one or more of the commercial credit bureaus, but usually ONLY if those purchases were paid using a business bank account, check, credit card, or debit card.
4) Attempting to use a virtual address, mail-drop, or PO Box as your physical address
Business credit reporting agencies require the physical address of your business operations to be associated to your account. If you need a separate "mailing" address, then yes, a virtual mail-drop or PO Box is fine, and it can be designated as such in the business credit profile. You'll still need to show an address where your business actually conducts active operations. There are very few acceptable exceptions to this rule. Purposely misrepresenting a virtual mail-drop as a physical location is one of the main reasons why a company's commercial credit gets designated as "higher risk".
5) Failing to have all scores and ratings in place before credit applications begin
It doesn't matter if you have a perfect Paydex score and a dozen beautiful trade payments in place, if your report is missing the other five required D&B scores and ratings, you may find yourself coming up short. Many credit applications are processed through automated systems that allow the creditor or funding source to assign specific criteria that must be met in order for you to get an approval. If any criteria isn't met, you'll see one of those awful computer-generated decline notifications pop up, or a message saying "a decision can't be made at this time and a further review is necessary". You may still get an approval, but now a human is actually going to need to manually pull your credit file to see if you can qualify.
6) Failing to have consistent data across all platforms
If I have said it once, I've said it a bazillion times... EVERYTHING needs to match what is in your D&B file. That includes the business name, address, phone number, principal's name, and any other pertinent data that may be required on any in-person or online application you may process. That includes your website, printed materials, online presence, vendors, bank accounts, credit cards, and every application or form you submit. If the information isn't accurate in the D&B report, update it there before you open any new accounts or apply for new credit. You can update your D&B file for free by registering for the free DUNS Manager. In general, updates can get completed in about 7-10 days (government contractors about 3-5 days). Some updates could take up to 30 days to complete, especially if a D&B agent needs to verify data and can't reach you to get the information they need.
7) Failing to remove "identity theft" alerts/blocks/holds from your personal credit
It doesn't matter how good your commercial credit scores and ratings are if your potential creditor can't readily complete the most basic identity verification on the person who is submitting the credit application. Since 98% of verification is completed by searching for the principal's personal credit identity (not an actual credit inquiry) this path has to be wide open and clear of any obstructions. If you have ever put a hold or freeze on your personal credit profile due to possible identity theft, you'll need to start the removal process as soon as possible. If you have ever worked with a third party agency to make improvements to your FICO score, you should check your personal credit file to make sure they didn't initiate any holds, blocks, or freezes (a fairly common practice). If you find your personal credit file has been locked down, you can contact each of the bureaus and request the lock be released, a process that can take up to 90 days to complete.
So with all the things that COULD go wrong, it may be hard to remember there are lots of things that can go very right, too! I have seen many business owners get credit approvals after overcoming these types of hurdles, and so can you!
Feel free to reach out to me directly if you have any questions or need one-on-one assistance.