How to build credit with a credit card and Net 30 accounts
Credit: FreePik
Having strong business credit is about the long-term success of every company. It opens a lot of doors to better loan terms, higher credit limits, and all around gives more financial flexibility. Business credit cards are probably the most common avenue through which businesses build their credit, but few entrepreneurs understand how powerful Net 30 accounts can be in turbocharging the process. This guide will explain how combining credit cards with Net 30 accounts supercharges your credit-building journey.
Introduction: building business credit with a credit card
A great way to build credit is by acquiring a business credit card. Every time you make a payment on time, it gets reported to the credit bureaus, contributing toward good credit history. Using a business credit card responsibly-not maxing out your available balance, for example, and paying your balance in full and on time-shows lenders and vendors that you manage money well. And did you know there’s an even more potent tool that will help increase your creditworthiness even faster? Say hello to Net 30 accounts.
The added value of a credit card with Net 30 credit lines
Consider Net 30 accounts to be some form of secret weapon in your credit-building toolbox. They offer a special set of benefits when combined with a business credit card:
Diversification: Diversification in credit much like in investments, forms the backbone of any good credit score. Having both credit cards and Net 30 accounts shows lenders one can handle different kinds of credit obligation.
Credit utilization: Having a full utilization every month of your credit card is bound to bring down the credit score. A Net 30 account allows additional credit, thereby making it easy for one to maintain the overall credit utilization low and healthy.
Strategic expenses credit cards are for daily expenses and vacations. Net 30 accounts are better for big planned purchases from known suppliers. By using both strategically, you can optimize your spending and the building of credit.
Faster credit building: Most of the Net 30 accounts are easier to qualify for than business credit cards, which constitutes the reason they will do for a business with a limited credit history. They will help you build up a positive payment history fast; this will open more opportunities for credit cards and loans easily in the future.
How business Net 30 accounts help build business credit fast
Business net 30 accounts are trade credit lines which enable you to buy products and services today, and pay in a lump sum within 30 days from the date of invoicing. Here’s how it helps in rapid credit building:
Easier qualification: The majority of vendors offer Net 30 accounts with stricter qualifications set up by business loan issuers, thus it is easier for startups or businesses with minimal history of good credit.
Quick reporting: Vendors will report payment activity to reporting agencies like Dun & Bradstreet, for example, things that are important to your Paydex score, much more frequently than credit card providers do. As a result, your credit score will recover much quicker.
Building trust: Paying your Net 30 accounts on time will help you establish some trust with the vendors. The trust vendors offer includes granting higher credit limits, extended payment terms, and sometimes even early payment discounts. Doing this will further strengthen your credit profile and develop better business relationships.
Accessibility: Net 30 accounts are available with many vendors besides office supply companies offering business net 30 office supplies, and in other categories such as technology providers, retailers, and industrial suppliers. In this way, you can easily find the Net 30 account that suits your business needs.
How to set up a Net 30 credit line for your business
Pull your business credit: You’ll want to obtain copies of your business credit reports with the major credit bureaus: Dun & Bradstreet, Experian, and Equifax. This will give you a foundation understanding of your creditworthiness as it exists.
Locate net 30 vendors: Find vendors in your industry that offer Net 30 terms and report to at least one of the above credit bureaus. Some of the most popular options for this include Uline, Quill, Amazon Business, and Grainger.
Apply for a Net 30 credit line: Contact the supplier directly and inquire about their application process for an online Net 30 account. You will then be required to give information about your business, such as EIN, type of business, and financial history.
Timely payments: After all, pay the invoices on due dates, once approved. Paying a day or two over the due date can still adversely affect your credit score. Create reminders and automate payments to avoid the negative effects of late payments and maintain good credit.
Check your credit: Develop the habit of frequently following up on your business’s credit reports to monitor your credit journey, identify weaknesses or discrepancies, and fix them early on so as to keep your credit profile healthy.
Credit limits: For Net 30 accounts, vendors set up credit limits that may rise over time depending on a good payment history. It is advisable to start with modesty and then increase your credit utilization overtime because your creditworthiness is improving.
Different terms: While “Net 30” is the most common, some vendors may provide other terms that include Net 60 and even Net 90. Be aware of what payment terms attach to each account so you can ensure you pay within the appropriate due dates.
Credit reporting: Vendors do not report to all bureaus. You will find vendors that already report to bureaus where you are looking to build your credit portfolio.
By combining the benefits of credit cards and Net 30 credit lines, you can accelerate your business credit building and unlock greater financial opportunities for your company. Remember to use both responsibly, prioritize on-time payments, and monitor your credit reports regularly to ensure you’re on the path to credit success.
