As an individual, banks and other creditors report information about your accounts to credit bureaus. When you start a new business, you also have to concern yourself with the information that gets reported to commercial credit bureaus. If you're planning to open a business checking account, you may wonder if this action will affect your business credit report as well.
What Is a Business Credit Report?
A business credit report is a listing of transactions related to the activities of a company. The report usually links to an employer tax identification number (EIN) just as a personal credit report links to an individual's Social Security Number. When you apply for a commercial loan or company credit card and make ongoing payments, that information gets listed on the business credit report. Some suppliers and vendors also report payment information about their clients to business credit bureaus.
Does a Business Checking Account Get Reported?
If you provide an employer identification number when you open a business checking account, the bank can start reporting information regarding your account to business credit agencies. In some cases the name of the bank is listed as the official business bank account for the company on the report as well as the account status. If the account holder goes overdrawn on the account and owes a debt to the bank, that could cause a negative entry on the report. Also, if the company owner bounces a business check to a vendor and doesn't repay the amount, the vendor can report that check-related debt to a business credit bureau.
Reasons for Separating Business From Personal
Once you start a new business, it's smart to separate your personal bank accounts from business for a number of reasons. If you continue to write checks against your personal funds for business needs, it will be difficult to distinguish these withdrawals when creating financial statements and summaries for the company. Also, if you want to receive payment from a customer, you'll have to give your personal name instead of the business name as the payee. Establishing a separate business checking account is more efficient and professional.
Registering With Business Credit Bureaus
If you don't have a business credit report history for your company yet, you can take steps to start a file with one or more bureaus. For one, you can call bureaus directly with your company's information to register with the service. Secondly, it's important to separate your personal information from your business activities in every way possible. For instance, besides opening a separate business checking account with an EIN, you should also consider incorporating the business to further establish the company as a separate entity for data reporting purposes.
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