Dun & Bradstreet Business Credit Basics
Establishing Dun & Bradstreet’s business credit starts with creating a free D&B profile on their site. Once your business has been included in their database, you may now begin building your business credit.
- Access the Dun & Bradstreet website.
- Sign up for a free Dun & Bradstreet profile.
- Begin building credit for your business
The Paydex score is the credit rating system used by Dun & Bradstreet as a guide for potential lenders and vendors when choosing to extend credit to businesses. The ranking system is from 1-100, with higher numbers indicating better business credit history.
Establishing Credit for Your Business
Like personal credit, business credit lines are also reported to business credit reporting agencies, including Dun & Bradstreet. Here’s how you can establish and grow credit for your business.
Step 1: Obtain an EIN Number for your business
EIN stands for Employer Identification Number. The EIN is a number assigned to your business by the Internal Revenue Service (IRS) for tax identification purposes. Your bank and partner vendors may also require this information before choosing to do business with your company.
Caution: Some less than credible websites may lead you to believe there is a fee associated with obtaining an EIN. This is false and predatory, as the IRS does not charge for establishing an EIN.
Step 2: Open a business banking account
Opening a business bank account is critical for your new business. The benefits of opening a business bank account include:
- Establishing your business as an entity separate from your personal finances.
- Keeping your business bookkeeping simple and efficient.
- The ability to accept multiple payment types, including credit cards, which cannot be processed through a personal bank account.
- Having a prerequisite for future partnerships, incorporation, or sale of your business.
Using a business bank account is almost a necessity. A major pitfall of using a personal bank account for your business is that you will not be contributing to your Dun & Bradstreet PAYDEX score. The credit information will be included in your personal credit report, which is not what you want.
Step 3: Establish lines of credit with large starter vendors
There are a myriad of ways to start building your business credit, and one of the fastest and easiest ways is to establish lines of vendor credit with large corporations. Some examples of companies that can help you establish vendor credit include:
- Uline.com (shipping supplies and office equipment)
- Quill.com (office, cleaning, and packaging supplies)
- Grainger.com (industrial supplies like hardware, power tools, etc.)
Most, if not all, such vendor partners have reporting requirements that must be fulfilled before they will send transaction information to Dun & Bradstreet. Companies may require a minimum order amount before reporting to credit bureaus, or it may involve a system of prepayment for a new business looking to establish credit.
Important: Choose vendors who report business transaction data to D&B, to begin actively building your score. Credit cannot be built if it is not being reported.
Step 4: Make payments on time
This simple yet crucial step is often forgotten in the excitement of running a business by novice owners. Making payments on time (or early) is a leading metric used by lenders and vendor partners to evaluate the risk associated with extending credit to your business. One key is to keep careful financial records, so you don’t accidentally miss payments.
Recommended: Always pay at least the minimum balance to your business creditors every month to continue to build good credit.
Step 5: Monitor your business credit report
Stay informed on your business credit status by requesting a report from Dun & Bradstreet. You can use the D-U-N-S Manager app from Dun & Bradstreet to make sure your business information is correct and updated. D&B will check your identification to make sure you are authorized to access and update this information.
Dun & Bradstreet also offers a free service called CreditSignal. This service allows you access to select creditor reporting for the first 14 days. After this trial period, you can receive email updates on changes in your business credit reports and scores.
Business Credit Best Practices
Most business professionals agree on the following best practices for growing or improving business credit ratings:
- Set up lines of credit with more than one vendor: This will allow you to show multiple trade lines reporting on your Dun and Bradstreet credit report. This can help your business credit score rise faster.
- ALWAYS make payments before they are overdue: As we discussed previously, this will have major impacts on your credit score reporting.
- Use only your business bank accounts to make payments on behalf of your business: This will ensure the transactions are reported to Dun & Bradstreet and or other business credit companies and not included on your personal credit reports.
- Make careful financial records keeping a priority: This is necessary for tax purposes and the overall financial success of your business.
Common Credit Missteps and How to Avoid Them
Many new business owners find themselves making simple mistakes that can cost them dearly when trying to build good business credit. Some important examples to be aware of include:
- Do not apply for multiple business credit cards at the same time. Banks and other lenders may see these credit card applications as a sign that your business is in financial trouble and needs multiple streams of capital.
- Do not use lines of business credit to purchase items for personal use. This practice serves to keep the lines between personal and business credit from being blurred. Also, it keeps the financial paperwork cleaner and easier when tax time approaches.
- Do not use lines of credit to pay other creditors. This can be a slippery slope to business ruin. This can cause a domino effect of financial obfuscation, high-interest rate payments, and ballooning debt.
- Do not allow employees unrestricted access to business credit lines. You run the risk that even the most seemingly loyal employee begins treating this business credit line as free money. Most banks offer ways to set employee spending limits on your business accounts and receive notifications when transactions occur.
IMPORTANT: It is ideal to pay off all creditors each month to ensure you keep building good business credit.
Tip: Make sure all business purchases are made through business accounts and credit lines. If you mistakenly use a business credit card to make a personal purchase, reimburse the business account immediately. This keeps everything separate between your personal and business credit ratings.