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Building Awesome Business Credit with Dun & Bradstreet

Finance

Before learning about credit as a small business entrepreneur, I made many financial mistakes. If I'd known how easy it is to develop a superior business credit score, separate from personal credit, those mistakes could have been avoided.

The initial steps required to build business credit are:

  • Choosing your business name and location
  • Incorporating
  • Getting your Employer Identification Number (EIN)
  • Setting up separate accounts for your business phone and checking
  • Applying for business licenses and permits
  • Securing your first business trade account

In this article, I'll focus on building business credit with Dun & Bradstreet (D&B). While four companies—Credit.net, D&B, Equifax, and Experian—provide business credit reports, D&B remains the dominant force in business credit.

Why you need a D-U-N-S number and how to apply

After you establish your first business trade account, and one payment has been credited, apply for your D-U-N-S number from D&B. Your D-U-N-S number is free, and you can apply online. This will begin the process of establishing your business credit record. You should receive your number in 30 to 45 days.

Caution: D&B provides paid services to help you build your credit file. If you call the customer service line, the rep will probably try to sell you such products. Unless you have several established trade accounts without having a D-U-N-S number, these products will not be helpful to you.

Meanwhile, be fanatical about using your business name and address in exactly the same way in all places and on all accounts or business documents. When D&B researches your company to create your credit file, it will presume any variations, including similar names or different addresses, are not related to your business. D&B will check Yellow Page listings, state incorporation, and required licenses—all the things you have already put in place to move rapidly forward toward an excellent business credit score.

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Building your business credit with Dun & Bradstreet using your D-U-N-S number

When you receive your D-U-N-S number, call your first trade account and ask to have the number added to your credit file. Your credit history with that vendor will be automatically reported to your D&B credit file each month, under your D-U-N-S number.

Develop a plan to open a new trade account each month with a vendor in the D&B network, after your previous month's credit activity has been reported. Using the free service offered by D&B, you can check what's on your credit report.

Your goal should be to have five active trade accounts in good standing at the end of six months in order to build business credit with Dun & Bradstreet. Because all businesses do not report to D&B, your first five accounts must be part of the D&B network. Most major companies that extend credit to startups report to D&B. But, before you open an account, call the credit department and ask. Here are some suggestions of companies with reputations for extending credit to small businesses without requiring personal credit information:

  • Dell
  • FedEx/Kinkos
  • Fry's
  • Home Depot
  • Lowes
  • Uline
  • Staples
  • UPS

Another option is gas credit cards, which you're likely to use regularly:

  • Chevron
  • ConocoPhillips
  • ExxonMobil
  • Shell

What if your trade accounts are not reporting to Dun & Bradstreet?

What if, like me when I started out, you did use your personal credit history to qualify for business accounts?

If you own an established business with more than five accounts in your business name that are not being reported to D&B, you may be in need of some of their credit-building services to help you build business credit. Check with D&B to see whether you have an established credit file by using the same link you'd use to apply for the D-U-N-S number. If they have no credit file for you, read the details about the credit-building products they offer, and then call them to ask what they can do for you.

As an alternative, you can apply for a D-U-N-S number, and then contact each of your business creditors in the Dun & Bradstreet network to have your existing accounts and their histories reported to D&B under your D-U-N-S number.

D&B rates and reports your business credit as a Paydex score. While personal FICO scores range between 300 and 850, with scores over 720 being very good, business Paydex scores range between 0 and 100, with scores over 80 considered the best. Businesses that pay accounts before invoices are generated receive scores of 100 for their payment history. To drive your Paydex score up rapidly, you need to use five accounts every month and, immediately after purchasing, send a check to the company to pay for your purchase.

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RELATED: Drawing The Line Between Personal & Business Credit Cards

Profile: Lynette DeNike

Lynette's front row seat during events that caused today's evolving financial crisis, combined with a passion for helping consumers and small businesses understand credit, uniquely position her as a guide through the constantly changing credit maze.