When building up a business credit profile, you can utilize excellent trade references to convince companies and lenders to extend credit. Notable tradeline payment experiences are an important asset that successful companies place a high value on, as they can easily open doors for you.
Think of trade references as financial summaries in your business credit report that document your payment history with those companies who supply you with trade goods. Lenders can then review your references when making decisions on whether to approve your credit or loan application.
What Are They
Trade references come in the form of suppliers and vendors who’ve extended you credit when purchasing their services or products. This is most commonly done via net 30 invoicing, where you have thirty days to pay off your purchase.
Not all companies can be approved as a trade reference for credit. Those who offer monthly reporting are much more valuable when needing to quickly increase your business credit score.
If you’ve ever had late or delinquent payments with a specific company, this would not be a trade reference you’d want anyone to know about. The only reason you may want to add this kind of reference is if you wanted to showcase how you’ve changed your evil ways.
Many companies only take time to report delinquent payment activity to the major credit bureaus. Requesting they acknowledge your exemplary recent payment history can help lenders overlook past blemishes in your credit report.
Generally, when adding new references to your credit profile, you’ll have to have a glowing purchase history with them, which only highlights how great a customer you are.
A good trade reference is someone who you’ve been doing business with for some time, and with whom you’ve always promptly paid your bills.
Even if your vendor/supplier doesn’t automatically report your purchase history, you can still manually add these trade references to your credit profile. The bigger and more well-known these companies are, the better they look when added to your credit profile.
The best kind of trade references are net 30 vendors with easy approval requirements who also report monthly to the major credit bureaus. If your business credit is already well-established, then you can further apply to Tier 2 net 30 vendors and beyond.
The advantage of doing business with vendors who automatically report your purchase history is that you’ll get monthly credit score boosts just by ensuring your bills are paid on time.
How to Establish
When applying for billing terms with a new supplier, trade references can either be contacted directly or simply scrutinized by viewing your credit reports from Dun & Bradstreet, Experian, or Equifax.
So it’s important to note that when vendors call your trade references or seek out your credit history, that they are looking for customer stability and reliability.
When you deal with suppliers and vendors on a consistent basis, they will start to rely on your business. The more reliance they place on doing future business with you, the more likely they are to provide a trade reference.
Building vendor trust can take time as you will need to prove your worthiness as a loyal customer. A quicker way to get a trade reference is to utilize net 30 vendors who automatically report to major credit bureaus. As in, you won’t need to ask for a trade reference, since your purchase history will already be noted in their monthly reporting.
Your creditability as a trade reference, may even solely depend on you simply paying your bills on time. If you can pay a little earlier than requested, that’s even better, as D&B provides Paydex score boosts on early payments.
If your supplier transactions are mostly online, your vendor account standing and stellar payment history will greatly add to your credibility as a trade reference. For vendors who report all payments, it’s even more crucial that they are reporting your debts to always be paid in full, and on time.
Request Vendor Submission
Only 1-2% of vendors who extend net 30 accounts actually report regular payment history to credit bureaus. Most of the remainder might only report negative transactions, such as late or delinquent payments which are detrimental to your credit ratings.
At times, it might take some work to build up your business credit history. In regards to Dun & Bradstreet reporting, you’ll first need to apply for a DUNS number. If you don’t want to pay to get D&B fast-track approval, it can take up to 6 weeks to receive it in the mail.
Should your suppliers then not regularly submit your payment history, you might have to make a personal request that they do so. In this case, it will be your customer relationship and on-time payment history that will likely determine their willingness.