With increased economic uncertainties, small business owners feel greater pressure to do it right when building business credit. Unfortunately, this can mean you are faced with hard-sell tactics. Dozens of reader questions about business credit-building services have come to me since I wrote the 4-part You Can Build Awesome Business Credit series early this year. The many companies selling these business credit-building services, including Dun & Bradstreet (D&B), which is the parent company of AllBusiness.com, offer to perform tasks you can complete for your self with ease.
For a fee of $500 and up, credit-building services open accounts for you. Typically, readers are initially happy with the service. Two or three accounts have been opened with Staples, Home Depot, Uline, and similar start-up friendly companies — even though readers could have easily established these accounts themselves at no expense.
However, after making a few requests for an oil company credit card, which will help them keep track of business travel expenses and seeing no action by the credit creating service, they contact me again to ask how they can qualify for one using only their EIN (employer identification number) and not their social security number. They want their business expenses to build their business credit history, not hurt their personal credit. About half-way through their one-year contract, they turn sour on the service. Their expectations aren’t being met.
A case in point: A woman, who founded a consulting firm in California, learned that her business received extremely high credit limits on accounts, but only because the credit-building company used her excellent personal credit on applications. In the end, her personal credit was destroyed and she did not establish any business credit history. Because she was paying off her accounts in accord with excellent business credit principles, she would have had the foundation for superior business credit after a few months without using the service. Instead, she had a financial mess.
Be careful about allowing a third-party to take over one of the most important responsibilities for you as an entrepreneur. Know that you can build your own business credit. The steps are simple to understand. And business credit is much easier to comprehend than personal credit, as you’ll discover when you read the 4-part series. More important, as a new business, when you delegate this process to another company, you miss the opportunities to establish rapport with the merchants you will patronize. While building your credit you will develop relationships with businesses and banks, which will serve you well as your business grows.
In addition to the questions about credit-building businesses, I’ve received many inquiries about what is required to qualify for a DUNS number, the identification number D&B assigns to your company for your credit file. Any legitimate business can qualify for a DUNS number. You can apply online . When forming a new company recently, I applied for a DUNS number. This is the email I received after applying:
Thank you for providing your company’s business information on D&B’s eUpdate Internet site. The D&B report on your business will be available for use in a variety of business purposes and you just made the important step of ensuring its accuracy and completeness.