How to Avoid Red Flags From Creditors

Building Business Credit

Many business owners simply do not know what does and does not cause a red flag when applying for business credit. This article is designed to help you avoid the pitfalls associated with business credit and cut down or eliminate credit denials when applying for business credit.

Difficulty:

Moderately Easy

Instructions

Things You'll Need

• Patience!
• Basic knowledge of how business credit works.
• Basic knowledge of credit reporting agencies

1. First and foremost, you need to have the correct business structure if you intend to build your business credit. Creditors will not give you the time of day much less a line of credit if your company is not incorporated or an LLC. Choose your business structure wisely to maximize your ability to build credit under your business name.

2. Many business owners buy virtual addresses for their business address. They do this usually because they are working out of their home, and they think that if they use their home address as their business address, it will hurt them in the eyes of the creditors. This is totally false. A VIRTUAL address used as a business address will get your credit application denied EVERY time. Why? When a creditor is verifying your business information, they will enter your address into a search engine. The search engine will not tell the creditor if it is a business or residential address. What it will tell the creditor is how many businesses are operating out of that address. What the creditor is specifically looking for is to make sure you are not using a virtual address. Likewise, you also can not use a P.O.Box or UPS drop box as your business address and build business credit under the company name. These are HUGE red flags for the creditors!

3. Your business phone must be a land line and not a cell phone and it MUST be listed with 411 Directory Assistance under the business name to obtain business credit. A creditor will enter your phone number into to 411 Directory Assistance and hit Reverse Lookup. If it displays your personal name instead of your company name, your credit application will be denied!

4. You must have open credit profiles at all 3 major credit bureaus used in business credit. This includes Dun & Bradstreet, Business Experian, and Business Equifax. Likewise, you company needs to have an active DNB/DUNS number from Dun & Bradstreet to obtain business lines of credit. Check your credit reports at least every six months to ensure the information is accurate!

5. You can not have more than 2 credit inquiries in a 30 day period when applying for business credit. Excessive inquiries are huge red flags to the creditors. Likewise, do not apply for a second line of credit if you have a previous credit application that is still pending. If you do so, you are likely to have both credit applications denied!

6. Excessive updates to your credit profiles can also be red flags to creditors. Try to consolidate your updates and limit them to no more than one update in a 12 month period. Updates would include a change in your business address or phone number. It is not uncommon for a business to relocate or obtain a new business phone number. However, when a business is doing this multiple times within a 12 month period, it can mean they are running or hiding from something. Therefore, the creditors treat this a major red flag.

7. You can add points when a creditor is scoring your credit application if you own your domain name and have a valid business email address. Yahoo, AOL, MSN, Hotmail, etc are all personal email accounts. To give your company more clout in the eyes of the creditors, spend the $10 per year it costs to buy your domain name. (Go Daddy will give you free business email accounts when you buy your domain name for around $10/yr cost)

Tips & Warnings

• Have patience when building your credit. You can not build $100,000 in business credit overnight, so have some patience and don't try to take shortcuts or use gimmicks

• Have a solid business structure before attempting to apply for business credit

• Manage the credit you do get well. There is no business credit repair like you see in the personal credit industry. It only takes 4 negative entries into your business credit report to ruin your business credit forever!

• Consider using a credit building program to build your business credit. We offer a nine month credit building program guaranteed to establish an "A" credit rating under your company name WITHOUT using your personal credit or credit information. Visit our website at www.PlatinumCorporateCredit.com to find out more or simply give us a call at 713-370-1640 during normal business hours.

Resources

• Building Business Credit