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Using Business Credit Cards To Build Your Business Credit Rating

If you have been in business for a while you would have already realized how important it is to have some sort of business credit if you want to get by. There are some startups that do not need any funding since the startup cost is low but then there are others that need a lot of funding to get off the ground and in order to do so they would need the security and convenience of a good credit rating in order to make the business a success.

The points below will help your build business credit with the use of a business credit card.

1. Keep Your Business Credit Separate From Personal Credit

To establish business credit that is separate from your personal credit you have to register your business and get a business license. You will also need to apply for an Employer Identification Number (EIN) from the IRS once the business is set up. This number will be used when you file your business tax returns and conduct any business that relates to your business credit. Once you have all of this established you can then apply for the business credit card in the name of your business rather than under you name. Any reporting done will be done in the name of your business.

2. Register the Business With a Business Credit Reporting Agency

Similar to those credit reporting agencies for consumers business credit reporting agencies collect and disburse information about businesses. Registering with these agencies will establish a file in your business name and your credit card providers and other business that extend credit to you can report your activities. Two well recognized agencies that you should register with are Dun and Bradstreet and Experian. Once you have established accounts there ask your creditors to send in your reports so that you will be on your way to a building a positive record.

3. Use Your Business Credit

You must obtain and make use of credit extended to you to build business credit. This is where a business credit card can really prove to be handy. Initially your terms and rates might not be the best but if you pay off the balance early you can avoid them and still get the benefit of building a positive rating. Use the card and make your payments on time so there are no delinquencies to mar your report. Vendor credit and other loans can also work along with your credit cards to help you establish a good credit rating. It is important the when you apply for the business credit card that you supply your EIN so that the reports are credited to your business account.

4. Be Responsible

If you want to establish a positive reputation and get easy approval for loans in the future you need to be responsible with the credit given to you. This means that you must make your payments on time, pay in full or least pay more than the minimum payment, don’t max out the credit card and stay within the terms and conditions of the credit card account. Aside from giving you accessibility to future loans a good business credit rating will give you the best rates and terms which is important if you want to maximize your profits.

Using business credit cards is the fastest way to go about building credit for your business. It is a good way to separate your business and personal credit which decreases your liability if your business fails. If you establish a separate credit account for your business you won’t have to face the ruin of your personal credit if you are unable to meet your business debt. It also ensures your protection if your company is brought up in any legal proceedings.

Your business credit helps you maintain good record keeping and establish your business as a stable and solid entity that is completely separate from you as the owner.