Your business credit score can prove to be an asset or a deficit depending on your rating. When businesses first start out, it is usually the time they need more credit to up the capital available to keep things running. While this doesn’t sound like an ideal scenario to a financial advisor, for small to medium-sized business owners it is often a fact of life. So how can you improve your credit history, so you are in a better position to get the credit you need from important sources like your suppliers?
One of the best ways is to increase the tradelines that show up on your credit report. Here we review the impact of reporting business rent payments as a tradeline to help credit bureaus improve your credit score.
A tradeline is simply a record of activity for credit to your company. It helps show how much credit has been extended and establishes a record of any activity associated with credit activity. The tradelines show up once a borrower is approved for credit.
Tradelines help build credit because they show your history of handling credit. This is the premise for any credit scoring model and therefore allows credit bureaus and other lenders to predict how your ability to pay off credit might look in the future. This is one of the most important factors in Dun and Bradstreet’s Paydex score which requires at least three tradelines to calculate your score.
Unfortunately, some of the most important creditors you deal with, namely, your vendors and suppliers, don’t tend to report to credit bureaus. Because not all lenders report, it can have a negative effect on your credit score. You might be paying your suppliers, vendors and rent on time, but no one will ever know, as it isn’t factored in when your credit score is calculated. While business credit cards are always included, these other lenders commonly used by small businesses are not.
Since credit card companies are sharing lender information on the Small Business Financial Exchange (SBFE), it’s in your best interest to find tradelines that also report. But this can be a real challenge, especially if you already have relationships with suppliers and vendors you trust. You have to watch out for “seasoned tradelines.”
There are companies out there that sell seasoned tradelines to small business owners desperate to establish their credit more quickly. This is a shady operation, often discovered by credit bureaus. Your safest bet is to speak to suppliers and vendors to see if they can start reporting. However, there is an even easier option, which is to use your leased business space as a tradeline.
Unlike seasoned tradelines, your own rent payments are a legitimate option to help improve your credit. Not only is it legitimate, but also it is also quick. Rent reporting services are very affordable and easy to work with. They collect your landlord’s information and arrange to have a report sent to credit bureaus when you pay your rent. This allows you to quickly improve your business credit score as your reports show a history of continuous payments made on time and in full.
Even better is that these reports go to major credit bureaus including Dun & Bradstreet, Equifax, and Experian. A rent reporting service like Debie Rating also only reports rent when paid. There is no record sent of missed or late payments meaning your credit score can’t be negatively impacted. Your rent payments appear as separate tradeline items which means you can easily increase your tradelines if you don’t have the required three for a Dun & Bradstreet score. You can backdate your rent payments for 24 months, which automatically adds 24 tradelines to your credit report.
These additions are made for free and are included when you sign up with Debie Rating. The more positive tradelines that appear in your history, the more your business credit score improves. By adding 24 tradelines at once, you instantly see a boost.
All in all, using Debie Ratings is the best and safest way to improve your credit score. It is easy to set up, has the option to add 24 tradelines by backdating and avoids any complications or negative effects, as missed or late payments aren’t reported.
