The Truth About Business Tradelines

The Truth About Business Tradelines

If you’re trying to establish business credit, you’ve probably heard the term “tradelines.” You know they are important, but you’re not sure how to get them and how they can benefit your business. Here we’ll demystify them:

What Is a Tradeline?

A tradeline is simply industry-speak for “account.” They may include business credit cards, lines of credit, and loans. They also include information from vendors who report to commercial credit reporting agencies. For example, you may have an account with a vendor with terms that give you 90 days after the invoice to pay your bill (net-90 day terms). If that vendor reports information to a credit bureau, it creates a tradeline.

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Why Tradelines Matter

Tradelines are important for building credit because they provide information about how you’ve handled credit in the past. Without that kind of information, it is difficult for a credit scoring model to predict how you will pay in the future. The Paydex score produced by D&B, for example, requires three tradelines to calculate a score.

How to Find Tradelines That Report

Establishing good business credit is often a confusing process because not all lenders and vendors report to all major business credit reporting agencies. For example, information about your equipment lease may show up in the PayNet database, while information about business credit cards is often shared with lenders via the Small Business Financial Exchange (SBFE).

Tip: Need help finding accounts that report to commercial credit reporting agencies? Use the free tools in your Nav account. Specifically, the BusinessLauncher tool will help you identify companies that report, and the Nav Marketplace identifies accounts that report with the CreditBuilder badge.

Seasoned Tradelines

You may have heard the term “seasoned tradelines.” It refers to accounts with an established credit history. Some companies offer to sell seasoned tradelines to help business owners establish credit quickly. Here’s how it works:

A company will establish a corporation, and get accounts under that corporate name, with the goal of “flipping” it. They will then sell this “shelf corporation” to another business with the promise that they will immediately have access to thousands of dollars in credit lines. But rarely does this turn out to be what it seems. The established credit lines may not be the type of funding the new business needs, and if lenders catch whiff of the new business owner trying to take advantage of this scheme they can quickly shut those accounts down. “It’s usually shady,” says Nav CEO Levi King. While there may legitimate reasons for buying a shelf corporation, using one to try to get access to funding your business otherwise would not qualify for should not be one of them.

What’s Next?

Building strong business credit is a worthwhile goal. It can open up avenues to better financing for your business, help you separate personal and business credit, and can eventually help you avoid risky personal guarantees when you borrow. Establishing positive tradelines is a crucial step in that process. To do so, you will want to take the following steps:

    • Open a business credit card which will be reported to commercial credit agencies, and
    • Establish accounts with lenders and/or vendors who will report to the business credit agencies. You can find them by using the free BusinessLauncher tool available with a free Nav account.
    • Pay your accounts on time (early is even better) and you’ll be on your way to establishing a high business credit score.

Ready to see your credit data and start building better business credit? Check Your Personal and Business Credit For Free (No Credit Card Required).

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8 responses to “The Truth About Business Tradelines

  1. If you never had a credit card for personal or business, with never having a card and you have no lates, no open or any current cards within the last 4 years. How do you get approved for a credit card with a 526 score

    1. I have two suggestions for you Tony: a secured credit card and a credit builder loan. One will give you a revolving account reference and the other an installment account reference. If you don’t have any negative information on your credit reports, my prediction is you’ll see some results fairly quickly from having current positive references listed.

  2. Hello. I am in the process of trying to build my business credit. Please contact me in regards to steering me in the correct direction.

    1. Joaquina,

      The best place to start is with a free Nav account. Once you sign up you’ll have access to our free tool called Business Launcher. It will help walk you through the steps of building business credit. If you have specific questions as you go through that, you can reach out to our customer support team. They’d be happy to help.