My Business Credit Journey to 1,000,000

A couple months ago, home depot actually stopped taking applications online and they also wanted a PG for all business credit applications. It seems that little by little, but surely business credit is loosening up. I applied for a home depot account a few days ago, after chatting to a client and discovering that he was approved with no PG. The company that I used was 3 years old, had 6 tradelines with a elevated of $5000. I “now owed” like $100. I did not get an immediate approval. I got code 25 and a reference number.
When calling in they accepted me for $4000 over the phone. I asked if there is any possibility of an instantaneous credit line credit, and the rep politely said no. She also mentioned that I can apply for a CLI in 6 months. At the moment, this is the best time to initiate on your business credit building journey. Getting a shelf corp will help loads, but starting from scratch cannot hurt.

Marc

I was thinking about my next post when I three emails between yesterday and today asking about CIT and their bankruptcy and how it will involve us in the business credit world. There are a couple things we have to address prior to even thinking about answering this question. Is CIT bankrupt? How much do we really depend on CIT for our business credit accounts? Will an additional bank take over accounts backed by CIT?

The truth is, CIT is not bankrupt, at least not for now. They filed for bankruptcy protection. CIT is in a reorganization phase and it plans to decrease its debt by $10 billion. This does not signify that they arfie in the clear, we should still be wary of the potential BK. The depressing thing is, by the time we actually read about their BK(if it happens), they would have already filed.

On the question of our dependency on their credit, this is a  subjective one. In this precise moment, the only CIT account that I can think of, that is accessible with no PG is Dell. Now this is a huge deal as many of us look forward to getting a dell business credit account with no PG. I myself have been having some troubles with getting approved regularly. It seems that some of their restructuring has to do with tightening their belts. But that is predictable and expected. On the other side, “CIT is a lender to nearly a million mostly small and midsize businesses and companies, and while its failure may not jolt financial markets in a large way, it could hurt the flow of credit to many businesses to whom banks traditionally won’t lend.”  (according to bloomberg). So for those of us who get financing from CIT with PG’s, this may reduce the amount of credit that is offered.

At any time a bank disappears, we have hopes of an additional bank stepping in and filling their shoes. The sad thing is that we have not seen that with HSBC leaving office depot business credit and Best Buy business credit accounts. The good thing though, is CITI may finance dell, as they have in the past. ALl is not lost, and I do not think that we should hold our heads, at least not yet.
CIT is at least 100 years old, and I will hope that they will stand the waves.

Marc

A while back Dell business credit was backed by CIT and more recently they have been backed by Citi. I applied for a business credit account from them today and low and behold they are backed by CIT again. This bothers me because a number of things are happening in the business credit world that does not look right.

First HSBC leaves the scene and leaves us without Office Max and Bestbuy business credit accounts. BestBuy only has net 30 accounts now and it seems that office depot is using Bill me later. Then we see that staples’ belt is really tight, denying a 4 year old corp with a great 80 paydex. Now citi leaves dell and I hear talk of them leaving Key Bank next year and US bank picking up Key Bank. What next?

I do not know Key Bank to be business credit friendly (ie. no pg friendly) but we can only cross our fingers. I also got denied by sears with a 4 year old corp and good trades, so I am not sure what is going on. Let’s simply build strong business credit so that it will be hard to be denied. If there is anytime to get business credit it is NOW.

Marc

As I guess you would have figured out from my previous post, I was getting a bit worried that staples, and more broadly, business credit accounts are either diminishing or tightening, but I cannot seem to find the logic in it. When I applied to staples this time, if I were to get denied, I could have simply summed it up to staples tightening their belts.

I applied to Citi for a staples business credit account with a 4 year old corp, where the highest trade was $2500 and the are only 4 tradelines on the business credit file, and got approved. It was not an instant approval and it was not for much. I applied Friday night, and called in yesterday. They put me on hold for about 15 minutes, so I was sure that I would be denied. Low and behold, approval for $500. It’s not great but its better than nothing right?

I sit here looking at the two credit files and I am trying to see what could have been the deciding factors. Now, corp 1 has 8 trades with a 10K high and corp 2 has 4 trades with a $2500 high trade. Corp 1 is even listed as making 2.3 million in revenue and corp 2 only is listed as $930,000. Both corps are 4 years old. The only big difference I see is that corp 1 has $7500 owed and corp 2 only has $100 owed. Although there is no debt to income/revenue ratio that affects your business credit score as there is in personal credit, I suspect that the underwriters use this as a deciding factor. This is the only logical explanation I can come up with in this situation.

Marc

Something new is up with Staples Business Credit. They are underwritten by Citi still, as far as I can see but so does Office Depot. Ok, I am rambling, here is the situation. I applied for Office depot about 2 weeks ago with a 4 year old corp, 6 trades, 10k high tradeline, the works. You would look at this corp and simply love it. Office depot gave me a $2000 account. I think thats pretty good for office depot. I then went to staples and applied with the same corp like a week later. I got the “call, we need more info” screen with a reference number and a code 25. This is usual for me so I called in. They wanted a business license AND a PG. WTF?…lol…that’s strange….

A few months back I mentioned that staples was tightening up because I had a similar situation but come on now. Has anyone else have this experience?

I post these experiences so that we can all learn and get a feel for whats going on at different times. I also got some heads up on some changes on some cash accounts, but that will come later. I try my best to keep up to date with the changes in the business credit world.

Marc

In keeping with covering an expanded range of topics outside of simply business credit, I decided to post on some tips that I have used in the past that helped me boost my personal credit score. We all should know that late payments affect our FICO score as well as possibilities for future credit line increases, and our aim should be to keep our personal credit as spotless as possible. Even if you have bad credit now, fixing your credit should be an ongoing and deliberate process. I have used three methods in the past to remove late payments that have all been successful. Some creditors may not go for one, so you simply have to use another method.

1. Simply ask for the Late Payment to be removed on a Goodwill basis.

The idea is simple and it works well but there needs to be some merit in your request. You must have some sought of positive payment history in the past and you must give a sincere reason for the late payment. You have to remember that people read these letters and they can make a change once convinced. This is probably the easiest and most effective way to get a late payment removed from your personal credit report. A goodwill request to remove a late payment may look something like this:

Dear Sir/Madam,
During the last month or so, I have been forced to pay a number of unexpected doctor’s fees and car repair expenses due to a small automobile accident that I was involved in. This forced me to have to make a tough decision and make my payment to the ************* account a bit late. As you can see in the past, I have been consistently on time with my payments and this is a  bad time for me to get such a report on my credit report as I plan to apply for a mortgage in a few months. This late payment may cause me to get a higher interest rate on the mortgage. I am kindly asking that perhaps out of goodwill, your agency would consider removing the late payment from my report.
Sincerely,

Joe Shmoe

Many people have late payments on their report and do not realize how they much this hurt your report, both with your FICO and also when underwriters make credit decisions based on your report. Goodwill letters work very well because it is an angle that isn’t usually taken by the average person trying to clean their credit.

2. Request for the Late Payment to be removed by offering to sign up for automatic payments.

I read this a couple years ago and a website that slips my mind right now. I recently called a friend of mine who owns a credit repair agency to get his take on this method and he confirmed that he has used this in the past as well. Apparently, creditors frequently offer to remove late payment entries if you, in exchange, agree to sign up for automatic payments. So in many situations, you can make the suggestion and the creditor may agree. I really like this idea because it works out well for both parties: the creditor can ensure future payments will be made on time, and you don’t have to ever worry about missing another payment.

3. Dispute Late Payments ass an inaccurate entry.

For any of you guys who have disputed items on your credit before, this is pretty straight forward. In many cases there are inaccurate late payments placed on your account for what ever reason, and disputing these usually drop off very quickly.

Many occasions occur when creditors have difficulty verifying specific information, such as late payments on your account. It also takes time, effort and man hours to verify this information and in many cases they simply don’t waste the time to verify something this small, so they simply grant the request.

I hope this helps you guys. I think that we should all take small continuous steps to clean up our credit as using both personal credit along with business credit will give us more credit available when needed. The more credit the better (if you know how to use it)

Mike

Since I am gotten into the business credit industry I have gotten more questions than I will like to admit about buying real estate with business credit. A couple years ago it was possible, but extremely difficult to get a commercial mortgage with no PG, and it is simply impossible to get it now. Strangelyenough though, it may be easier than ever to buy real estate with business credit now.

You can buy homes cash. Yes, you read it right, with cash. This will mean that you will pay for the house in full without getting a mortgage. Basically you will have to find homes that are cheap enough to acquire enough business credit to buy it cash and still have the ability to afford the monthly payments. It seems that Detroit is giving us this opportunity. I am not saying that we could purchase homes, rent them out and sell them in a couple months and make a killing, but what I am saying is that Detroit lends for the ability to own real estate for a very affordable price.

I do not claim to be a real estate specialist but I have seen homes listed in Detroit for as little as $8000 which needed as little as $1000 in repairs. You can view some of these listings at http://www.myfirstmichiganhome.com/.

These guys not only find you properties, but they work with contractors to get the house up to standard, and they also assist in finding renters (section  8 in many cases) to fill the houses.

I myself have given a quick browse of creaigslist Detroit so see what is available. One of my goals here is to purchase on property by February, with business credit.

Marc

Defaulting is something that we know occurs, it really does, but I try my best not to talk about it because many people who acquire business credit seem to think that it is ok to default once there is no personal guarantee in the business credit account in question.

We all strive to acquire lines of credit, whether it be cash lines or vendor lines, with NO Pg for various reasons. Some of us have bad personal credit and some of us simply do not want to attach the risk of doing business to your personal credit. The issue of defaulting on accounts has come up in conversation with a number of clients and I have spoken to one or two people who claim that the creditors try to attach the charged off account to their personal credit. I have not personally seen anything like this but I have seen defaulted accounts affect a new business.

There seems to be a belief that one can start one company, default on the accounts and start another one without it being an issue to get business credit all over again. While this may be true kind of in theory(as the defaulted accounts have nothing to do with you are your new business), I have recently seen this hurt a client and badly. He previously had a corporation with a business credit account with Office Depot(one of the first revolving accounts that you get), and was unable to pay it off. One year later he started a new business and proceeded to get an account with office depot again, and was approved. He used the card a couple of times and one day, while in the store, he realized the card was turned off. He then called Office Depot and they said that they realized that he had another card with a previous business that was not paid. When he logged into eupdate, he realized he paydex was gone and his corp was rated as high risk. His credit file now had a note that said that “A Executive Search revealed that he was an executive of another corporation”. They basically tied the old corps bad credit to the new one.

This situation should give you an idea of what is possible and all precautions should be taken when dealing with business credit and potentially defaulting on accounts. Business credit is not free money, :S,

Marc