Saturday, 22 December 2012

Using Your DUNS number to build credit history

Just like individuals, businesses need to establish credit to further their endeavors. This can seem like a daunting task, particularly if you own a small business, but have less than ideal credit scores. Fortunately, there are ways to establish positive business credit, even if your personal credit is not so great. One way to do this is for you (as the business owner) to obtain and utilize a DUNS number, which is a unique nine-character number that identifies an organization. The DUNS number, which stands for "data universal numbering system") is a tool that is used by the federal government to track how federal money is distributed. Most large organizations, libraries, colleges, and research universities already have DUNS numbers, but many small business owners are unaware of the benefits of the number. One of the major advantages is that requesting the number will automatically start a credit profile for your business.

Obtaining a DUNS number is very simple, particularly since you can obtain one almost immediately upon the time of your application via phone or web. A DUNS number can be acquired by a business free of charge. The required information that you must provide to acquire a DUNS number includes the name of your organization, the organization's address, the name of the CEO or organization owner, legal structure of the business (corporation, partnership, etc.), the year the organization started, primary type of business, and your total number of employees (both full and part time).

Many times, almost immediately after you are given a DUNS number, you will receive an offer that is essentially a "credit builder package." This program requires you to pay a fee that ranges anywhere between $200 and $700. Though this is one way to quickly build your credit score, it is most often a waste of money, since companies will report your scores automatically, regardless of whether you purchase a formal package. If you are the owner of a small business, your first credit priority should be to establish a Dun and Bradstreet Paydex score, which is scored on a scale of 0 to 100. After looking at the credit score of your business, the Paydex is the next thing a prospective lender will examine. Essentially, your Paydex score will tell lenders and suppliers how long you take to pay your bills. To improve your Paydex score (or build it up in the first place), you should follow several steps. First, you should do business with vendors that report to Dun and Bradstreet in as many cases as you can. The more you prove yourself to vendors within the Paydex system, the better your score will become. Next, you should pay all of your bills within two weeks of their due date (if not earlier). This will make sure that you have a score of 70 or higher, which is considered solid. Third, because the Paydex credit score is dollar-weighted, you have the chance to increase your score dramatically by paying off a large balance early.

When it comes to establishing basic business credit, the most effective ways are also the easiest. Once you have been given the opportunity to establish your business credit score (thanks to the DUNS number), you should focus on paying your bills fully and on time. The road to establishing business credit is much the same as the one that is necessarily to establishing personal credit. First, you must find someone who is willing to extend a line of credit to you. There are a wide variety of companies that you can find who will report your credit history. Some of the easiest credit cards to acquire is from basic office supply companies like Office Max, Office Depot, and Staples. Even if you are the owner of a new business, you shouldn't have too much trouble getting one of these companies to extend credit to you. After you have established credit with some of these "lower level" companies, you can then seek to obtain credit from companies like Home Depot or Lowe's. After these companies have reported (again, typically within 45-60 days), you will want to seek to obtain general use credit cards.

Having a DUNS number can help you open many doors on your way to establishing a solid credit history. It is crucial that your business can obtain, and then continue to keep, a positive credit history. Acquiring a DUNS number can set you on your way as you endeavor to do this. The most important thing to remember is to make a conscious effort to pay all of your bills on time and continue to strive for the best credit score that you can.