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How Can I Build and Improve My Credit Score To Secure A Business Loan?

Your personal credit score plays a crucial role in financing your trucking company and small business. That is why it is crucial to understand its importance, where to find it, and how to improve it.

Improving and building personal credit will impact the level of financing you can receive for starting your trucking business in addition to your interest rate. An excellent credit score (above 750) will provide you with more business loan options such as Small Business Administration (SBA) loans, business lines of credit, and traditional bank loans.

Although your business is its own entity (LLC or Corporation), a financial institution must rely on your personal credit history to evaluate your financing options due to a lack of credit history for the business. On average, commercial truck loans require a 600-660 minimum personal credit score rating.

There are multiple ways to locate your credit score. We recommend using free sites like Experian or Credit Karma. Some financial institutions that you may already be a member of also offer free credit checks such as Chase.

Factors That Impact a Personal Credit Score & How to Improve It

To improve your credit score you can implement a variety of tactics. But first, let’s talk about the factors that impact your credit score and what lenders look at to determine if you qualify for credit.

  • Payment History (e.g., late payments, early or on-time payments) – impacts about 40% of your credit score

  • Prior Credit History/ Account Age – impacts about 20% of your credit score

  • Credit Usage – impacts about 20% of your credit score

  • Total Balances – impacts about 10% of your credit score

  • Credit Checks – impacts about 5% of your credit score

  • Available Credit – impacts about 5% of your credit score

Now that you have a better idea of what makes up your credit score, let’s chat about a few ways to improve it!

  • Pay bills on time – this is crucial! Late payments are extremely detrimental to your credit score.

  • Pay existing credit balances strategically – try to use less than 30% of available credit and ensure the balance is relatively low when the credit card provider reports to the credit bureaus

  • Ask for a credit increase on existing accounts – this will help lower credit utilization

  • Handle existing collection accounts – pay any collection accounts off as soon as possible to stop the debt from being reported

  • Dispute any credit report errors – keep an eye on your credit report for any mistakes such as incorrect late payments

  • If you have not previously used any credit, there are a few ways to start building a credit history.

  • Receiving credit for paying monthly bills (utilities, cell phone, etc.) with tools like Experian Boost.

  • Apply for a secured credit card – requires a security deposit

  • Take out a small personal loan with a local community credit union – only do this if you absolutely have the funds to pay this loan back

  • Become an authorized user on a family member's existing account with good credit (authorized users have zero liability)

Please talk with a financial advisor about the best way to improve or begin building your credit history.

Building Business Credit

New small business owners will often start their businesses using personal credit. This isn’t always the best option. If the small business owner continues to use their personal credit to run the business, it could put their personal assets at risk if the business runs into any challenges or difficulties. Many lenders and creditors are relying less on personal credit when assessing a business’s financial health because personal credit (consumer behavior) is not always the best predictor of business behavior. More lenders are taking a blended scoring approach that considers both personal and business credit attributes to assess small business risk and calculate a more comprehensive risk score for the business. Recognizing this view, it is important to take steps to manage and protect your credit standings, both personal and business.

Factors That Impact a Business Credit Score & How to Improve It

Some factors that impact a business credit score include:

  • Company size

  • Level of credit utilization

  • Current outstanding debts

  • Length of company credit history

Building and improving a business credit score can be accomplished by:

  • Registering your business - (LLC, Corporation, etc.)

  • Obtaining a federal Employer Identification Number (EIN)

  • Setting up a business phone line

  • Getting a business bank account in the legal business name

  • Opening a business credit file with Dun & Bradstreet, Experian, and Equifax

  • Establishing lines of credit with suppliers

  • Getting a business credit card

  • Making payments on time (or early)

  • Keeping existing credit accounts open

  • Receiving loans from lenders who report to business credit bureaus

It's important to note that business credit scores are measured differently than personal credit scores. A business credit score is measured on a scale of 1 to 100. For example, D&B uses a PAYDEX credit score. The PAYDEX credit score scale defines a good business credit score in the range of 80-100 (invoices paid on or before 30 days or agreed terms), a fair score in the range of 50-79 (invoices paid 15-30 days beyond payment terms), and a bad score in the range of 1-49 (invoices paid 60-120 days beyond payment terms).

There is one more thing that you should consider doing and that is establishing a DUNS number. If you have registered your business, you are now capable of applying for a DUNS Number. A DUNS number is used by financial institutions and potential business partners to help determine your financial stability and reliability. A DUNS Number does come at a cost of $200+. Receiving this number will help you gain access to more initial loan options and will allow you to build business credit quicker if you seek to purchase more equipment or establish more lines of credit down the road.

There are two major choices when it comes to starting your professional driving career – starting your own trucking business or working as a company driver. There are multiple ways to start your trucking business with different levels of investment, risk, pay, and support. It should be clear by now that it takes a definitive plan. If you feel drawn to the idea of starting your own trucking business, and if you feel you have the inner drive to drive, Soshaul can help! Please check out our free and for-purchase resources, templates, and in-depth courses available on our website.

Are you interested in learning more about topics such as IFTA or IRP, business plans or business structures, equipment or technology, or perhaps sales and marketing in transportation? Ready to START, DRIVE, & ACCELERATE your trucking business? Check out our course here!

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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC - Copyright 2023 - does not assume responsibility for any omissions, errors, or ambiguity contained herein. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.


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