How to Obtain Credit Using an EIN

You may be familiar with your credit report and how your financial history is presented there. A score is assigned in your credit report based on how you handle your financial accounts, and your credit report and score serve as a statement of your ability to handle debt. In addition to a personal credit report, business owners can establish business credit. The credit agencies for businesses are: Dun and Bradstreet, Experian Business, Equifax Business and Business Credit USA. Accounts are reported as trade credit transactions. The accounts are reported using the business name and your federal tax identification number (FIN), also known as an Employer Identification Number (EIN). There are a few steps you can take to establish your business credit score and profile.

Instructions

1

Visit the IRS website (see Reference section). Read about the EIN number and when ready, apply for your EIN online.

2

Complete the application process. Make sure you double-check your entries for accuracy. Pay close attention to the spelling of the business name. At the completion of the application, you will be given your EIN number immediately. Print this information and keep it in your company records.

3

Register for a Dun and Bradstreet number. (See Reference section.) Once you are registered, your business will be listed in Dun & Bradstreet's database and will be visible to banks and lenders.

4

Register for any business licenses you may need for your state. Contact your local government offices to determine if you are required to obtain any specific licenses for your company.

5

Open a bank account in your business name. You will need to take your EIN number as well as copies of any licenses you obtained through your state.

6

Establish phone service in the business name. Even if you have a home business, you need to open a phone line in the business name. When you apply for business credit, this is often a requirement.

7

Apply for a secured credit card in the business name. Also, Staples, Office Depot and Dell computers are all companies known to give new business owners a small line of credit. Make all payments on time, and after six months, you will be able to apply for other business credit.

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Help Me Improve My Credit

Other than your Social Security number, your credit score might be the most important number you possess. A low credit score can negatively affect your life in a number of ways -- the interest rate you can get on a home mortgage, what type of credit cards you are eligible to carry, even the type of job you can land -- so you'll want the best score possible. If you are saddled with a low credit score or want to improve your existing score, there are ways to increase that number.

Build Credit

Your credit history is an important part of your credit score: If you don't have any history, your score will suffer. To get started on the right path, open up an account with a credit card company or with a bank offering a secured credit card. According to MSN Money, good alternatives can be found at lending institutions such as Citi, Orchard Bank and Public Savings Bank. You don't have to carry a balance to build a credit but you should use the card once or twice to show lenders that you have the ability to incur debt and pay off your debts just as quickly.

Resolve Credit Card Debt

The opposite of having no credit history is having too much credit card debt. An important variable in determining your credit score is the amount of debt you are carrying. According to MSN Money, paying off or paying down your debt on revolving credit -- such as credit cards -- can help raise your credit score. When evaluating credit risks, many lenders look at how much available credit you have on each card. Red flags are raised when those percentages are above 30 percent of the available credit, so paying down the debt should be a major priority.

Curb Your Spending

Your spending habits, especially when it comes to revolving credit, can get you in trouble, too. Even if you pay off all your bills each month, if you are racking up massive bills that are pushing your debt near the limit of your credit cards' available balances, then you need to change those habits. Your credit score, according to "The Washington Post," is greatly influenced by the amount of available credit you have at your disposal. If you are constantly spending to the limits of that credit, your score will suffer. Raising that score means paying down the debt and maintaining balances between 10 and 30 percent of the available credit -- a move that requires you to alter your spending habits but could pay off by raising your score by 70 points or more.

Argue Errors

Errors happen and, when they happen with factors that could lower your credit score, you have an obligation to yourself to report those instances. Typical errors, according to MSN Money, are issues such as late payment and collection notices that do not belong to you, reported balances that are lower than they actually are and open debt that has actually been closed. These mistakes can greatly affect your score, so you'll want to get them rectified and off your books.

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What Law Covers Credit Reporting?

Congress passed the Fair Credit Reporting Act in 1970 and has since amended it to protect consumers from unfair credit reporting practices. The law works to ensure that the information included on your credit report is accurate and consistent between each of the three major credit reporting bureaus in the United States, including Experian, TransUnion and Equifax. The law also elevates identity theft crimes to felony level and improves the ability of a consumer to prove he is the victim of identity theft.

Rights

The Fair Credit Reporting Act requires anyone who denies you credit because of information on your credit report to inform you of your reason for denial, as well as offer you a free copy of your credit report. The law also entitles consumers with the right to a free annual credit report from each of the major credit bureaus. The Federal Trade Commission encourages consumers to use the annual report to search for inaccurate or inconsistent content.

Time Frame

Your creditors may not report old or outdated information to the credit bureaus. Consumer reporting agencies must remove negative collections, foreclosures and delinquent account information after seven years. Similarly, the law subjects bankruptcies and charged-off accounts to longer terms, capping the reporting time frame for such occurrences at 10 years.

Privacy

Your credit report contains information used by potential lenders to determine your credit worthiness. The Fair Credit Reporting Act limits who has access to view your report to those with a valid reason. In addition to potential lenders, your insurance company, landlord and employer can also obtain a copy of your credit report, though you must personally grant an employer access to your information via written consent.

Credit Report

The law entitles you to a free copy of your credit report every 12 months. To obtain your free report, you can call 1-877-322-8228, or mail an annual credit report request form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Your credit report is also available online, but beware of websites that advertise free credit reports, but require you to make additional purchases in order to obtain your report. Instead, visit the Annual Credit Report website (see Resources), a service of the Federal Trade Commission, to ensure access to a free credit report. Remember that you will only receive a copy of your credit report and not your FICO score, which you must pay for.

Disputes

The Fair Credit Reporting Act provides consumers with the right to protest inaccurate information. By law, each consumer reporting agency must investigate disputed information on your credit report and must remove information found as fraudulent or incorrect from your credit report within 30 days. If you suspect that you are the victim of identity theft, you can report the crime to each of the credit bureaus and place a temporary freeze on the opening of future credit accounts. Additionally, you may request up to two free credit reports within the 12 months following reports of identity theft on your credit report.

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How to Build Better Credit

The number one key to better credit is to pay your bills on time. Creditors love people who can be counted on to never miss a payment. A steady record of on-time payments for 12 to 24 months can give your credit scores a significant boost. Many people seeking better credit look for quick fixes, but long-term approaches to managing finances generally offer the best results. You can build better credit on your own, or seek help from a nonprofit credit counseling agency. The agencies often offer free financial literacy classes.

Instructions

1

Get copies of your credit report--regularly. The reports are available for free from the website Annual Credit Report. It was established by the three credit bureaus to offer free reports as required by the Fair Credit Reporting Act. You are entitled to three reports every 12 months, including one each from the credit bureaus--TransUnion, Equifax and Experian. By ordering one every four months you can check your credit for free all year.

2

Review your current report for inaccuracies and delinquent accounts, such as accounts showing as past-due, charged-off or assigned to collection agencies.

3

Write a letter to the credit bureau at its address on the credit report to challenge inaccurate information. The credit bureaus sometimes make mistakes, and someone else's delinquent credit card account may be showing on your file. Clear that up by pointing it out to the credit bureau. Federal law requires the bureaus to correct inaccurate information within about 30 days of being notified.

4

Make payments to bring all your existing accounts current. Even one account showing 30 days behind can cause your credit scores to drop.

5

Resolve other negative entries including charge-offs, collection items and judgments. Charge-offs are delinquent accounts that were closed by the creditor because you stopped paying. Collection items generally are charged-off accounts that were sold to debt collectors. A judgment is a monetary award won in court after a debt collector wins a lawsuit against you for not paying your debt. These negative entries are very damaging to your credit, although their impact will lessen over time. Despite that, you should contact the creditor or debt collector for each account to work out a payment plan.

6

Pay down your existing accounts until you owe no more than 30 percent of your total credit limits. That's the level of credit utilization creditors like to see, according to "Businessweek" magazine. Maxing out your cards can indicate that you are too reliant on credit. Also, the website Bankrate says you should keep your total credit limit to no more than 20 percent of your household income. That means if your household income is $40,000 your credit lines should total $8,000 or less. That can be hard to do if you already have a home equity line of credit, which generally offers large credit lines. However, you should certainly try to stay within the guidelines with your credit cards and other unsecured debt.

7

Open new credit card accounts and never miss a payment--but don't add more credit than your household income can support. The new accounts, such as department store cards or credit cards, can help you add positive payment histories to your credit reports and lift your scores.

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How Long Can Closed Items Show on My Credit Report?

Closed items on a credit report may include old credit card accounts or paid-off loans. In some cases, keeping these items on your credit report is beneficial because it helps to establish a long-term credit history. In other cases, removing negative items can boost a credit score. After pulling a current copy of your credit report, inspect it for closed items to remove and improve your score.

Credit Reports

Credit bureaus collect and report data from public records and credit providers. The credit bureaus report this information on a credit report. The credit report is available to potential lenders upon your approval or for a soft inquiry. A soft inquiry allows creditors to determine credit eligibility prior to your making a request.

Negative Information

Potentially negative items remain on the account for up to seven years. This includes late and missed payments. Public records, including liens, Chapter 13 bankruptcies and foreclosures remain on a credit report for up to seven years. Tax liens remain on a credit report for up to 15 years if unpaid, or seven years if paid. Chapter 7, 11 and 12 bankruptcies remain on a credit report for up to 10 years.

Positive Information

Unlike negative credit information, most positive data remains on a credit report indefinitely. This positive data helps establish your long term credit history. Some paid, closed accounts will remain on your credit report for 10 years unless you request them removed.

Requesting Removal

You can submit a request to the credit bureaus to have data removed from your credit report after any mandatory time frames. To do so, file a report with the credit bureaus directly through the credit bureau's website.

Check Credit Report

Each year, you have the ability to obtain one free credit report from each of the three major credit bureaus -- TransUnion, Equifax and Experian. After requesting the credit bureaus remove closed accounts, obtain a copy of these credit reports to verify this. It can take up to 60 days for this update to occur. To obtain a free copy of your credit report, contact AnnualCreditReport.com, the only website approved to provide a free annual report.

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How do I Dispute Inaccurate Information on a Credit Report?

By law, credit-reporting agencies must investigate information on your credit report that you report as inaccurate. You are entitled to investigation updates and written confirmation of the company's findings. Errors will be removed from your credit report.

Disputing Errors

Contact the credit-reporting company about the error. Experian credit agency permits online dispute submissions. However, the Federal Trade Commission recommends sending a registered letter to the credit agency detailing the error. Include copies of documents supporting your claim.

Process

Within 30 days, the credit-reporting agency contacts applicable creditors about the error. Creditors perform an investigation and notify the credit-reporting agency of their findings. After reviewing information from all parties, the credit-reporting agency sends you a copy of its decision.

Obstacles

If a credit-reporting agency does not find an error, contact the creditor directly via registered mail and request proof of their findings. The credit-reporting agency is obligated to send you creditor contact information.

Considerations

If the dispute is not resolved to your satisfaction, you may have a note placed on your credit report reflecting the dispute.

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What Is Tier III Credit?

In a world where credit is king, your credit rating and tier level can have a significant impact on your ability to secure loans for mortgages and cars, how much interest you pay on such items, and your capacity to get credit cards or lines of credit. Having Tier III credit, which is considered below average, it may be challenging to obtain credit. Lenders view this as a slippery slope -- either they'll improve their credit or it will deteriorate further.

What Is Tier III Credit?

In accordance with the way the Fair Isaac Corporation, or FICO, credit model determines credit levels, if you have Tier III credit, your credit score falls somewhere between 560 and 619. The national average is 692, according to the credit rating agency Experian. Although Tier III is not the lowest tier, it's not that much better; in fact, it places you right on the cusp of slipping into an even lower credit tier. To put these figures into context, those classified as having a Tier IV rating have a poor credit score of 500 to 559, while individuals with Tier I, or excellent, credit have FICO scores of between 720 and 850.

Common Characteristics of Those with Tier III Credit Scores

People with Tier III credit often have less than five years of credit history; high credit card balances; a history of late loan, mortgage or credit card payments; a bankruptcy that occurred at least two years ago; and also may have some accounts in collections. What's more, economic recessions, such as the one occurring from 2007 to 2009, wreak havoc with many Americans' finances, affecting their ability to make payments on time and increasing the likelihood they'll incur more debt. This is unfortunate, because a full 65 percent of what determines your FICO credit score includes your payment history, which makes up 35 percent, and outstanding debt, which makes up 30 percent.

Effects on Credit and Loans

While Tier III credit does not automatically disqualify you from obtaining credit, mortgages or auto loans, it does make it harder and more expensive. For example, you might qualify for a credit card, but your interest rates will be higher than those with better credit. As for home and auto loans, your FICO ranking will impact the amount a lender will let you borrow, and they will most likely require you to make a higher down payment, as well as saddle you with higher interest rates. Generally speaking, the higher your credit score, the lower your monthly payments will be.

Finding Your Credit Score

Before you decide to apply for an auto, personal or mortgage loan, you should learn what your credit score is. By law, the federal government mandates that every American may obtain a free copy of their credit report from all three of the major credit reporting agencies -- Equifax, Experian and TransUnion. Each company applies a different set of criteria to determine your FICO credit score, so it's not uncommon for your credit rating to vary slightly. In such cases, the potential borrower typically uses the middle figure when making their lending decisions.

Another reason to review your credit standing annually is to look for identity theft, which would definitely result in a lower credit score. Signs of theft you might find on your credit report include credit cards that you didn't open and high balances on cards you rarely use.

Improving Your Credit Tier

If you discover that you have a Tier III rating, there are actions you can take to repair your credit. For instance, you can immediately pay off any accounts that are in collections. You may also turn to a credit counseling or restoration company if you need help resolving your credit problems. Once you clear all collections, it's important to get them removed from your report by working with each reporting agency. And, if you discover identity theft, you can begin to remedy the situation by alerting each company to the problem and taking the steps necessary to dispute fraudulent information.

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