How to Build Credit for Your Church

By Raul Rivera

When starting a church there are many things that a church planter must consider. In the first few months a church planter or new pastor will typically spend most of his/her time figuring out the logistics of actually operating a church.

And then, a few months into the church plant or shortly after the church has officially started, a pastor will wonder, “How do I build credit for my church?”

The truth of the matter is that good credit is not automatic; it requires a good credit history.

Similar to your own personal credit, your church’s credit history is essentially determined by how well you pay or have paid your bills, debts, and/or loans.  

In this blog I want to address how to build your credit history, even if you are just starting a newly planted church with zero history. We’ll also take a look at how to register your organization with credit bureaus and the advantage of having and maintaining good credit. 

But first, in order to understand good credit and how to build it, it is necessary to understand what bad credit is and how to avoid it.

How to avoid building bad credit

Failing to make payments to lenders is never good. If your church has been established for several years, has less than good credit, and is short on funds, best practice is to at least send partial payments.

Many lenders will receive partial payments and not report your account as being late as long as they are receiving some form of payment.

It is important to follow up with a phone call to ask them if they will allow you some time to make up the difference.

In many cases the customer service representative will have some leeway in noting on your account that, “the customer is doing his/her best to make the rest of the payment.”

You may also buy some time and avoid a thirty-day late payment hitting your credit report.

How to build credit history for your church

In order for your church to obtain good credit it is imperative to begin building your credit history.

Below are three practical steps you can take to begin doing so today:

1. Apply for a church credit card.
2. Obtain a small installment loan.
3. Register your church with credit bureaus.

Let’s look at each of these steps a little further.

1. Apply for a church credit card

Applying for a church credit card and using it monthly will help build credit for your church. The bank where your church does business is a great place to start.

Keep in mind that you will want to make sure you ask for a credit card, and not a debit card. Additionally, if your church is just starting out, you will likely receive a low credit line, typically $2,000 or less. 

Once opened, you will want to make sure that you do not miss a monthly payment, and you do not want to max the church’s credit card on a regular basis.

Doing so can have a negative effect on the church’s credit score. To help ensure that this does not happen, we suggest using the 25% rule as best practice. 

The 25% rule is the practice of not charging more than 25% of the approved credit amount on the credit card.

At times the 25% rule may not be practical for your church to follow. It is understandable that your church may need to make a large purchase for something such as sound equipment.

Or, perhaps the credit limit on the church’s credit card is only $1,000, and only being able to use $250 per month is just not practical.

If so, best practice is to formulate a plan to send small payments throughout the month in order to keep the balance as low as possible.

Lastly, if you obtain a church credit card, you should consider implementing a Credit Card Use Policy.

Give us a call at 877-494-4655, and we’ll be happy to send you one.

2. Obtain a small installment loan

As your church begins using its credit card to build good credit, you may also want to consider obtaining a small installment loan.

These types of loans generally range between $2,000 - $5,000 and usually last between 12-36 months.

Small installment loans are typically preferable because they are going to have lower interest rates. They also provide an easy means for showing consistent, timely payments.

Again, it is not a bad idea to inquire with your church’s bank about obtaining a small installment loan since you have already begun to build a positive relationship with them.

Even if you do not intend to use the money, best practice is to allow the loan to go full term or at least half of the term in order for it to have a positive effect on your credit history.

It is also imperative that payments be made on time.

Otherwise, simply paying, or giving, the money right back to the bank defeats the original intent of obtaining the loan: demonstrating your ability to make consistent, timely payments.

3. Register your church with credit bureaus

Another way to begin building credit is to register your church with one of the four major credit bureaus for businesses.

Only a small fraction of businesses and churches are aware that they can register to have their church and/or business known by these agencies.

Below is a list of several credit bureaus.

• Dun & Bradstreet
• Experian Business
• Equifax Business
• TransUnion

In addition, you should consider conducting business with companies, such as utility providers, credit card companies, or cell phone providers, who submit credit reports to any of the major credit bureaus.

Your credit report is based on the bill payments you have missed or been late paying, loans that you have paid off, plus your current amount of debt.

This is a simple and efficient way to begin building your church’s credit history.

Create a financial plan for your church’s future

Establishing credit for your church is important, and it takes time. Additionally, it requires you to be a good steward with what God has blessed you and your church with.

This is where maintaining finances and financial records for your church play an important role, and our Bookkeeping Service will help you to do just that.

If you desires to establish a powerful internal financial structure for your church, I invite you to click on the link below for more information.

And if you have questions about how our bookkeeping service can help your ministry, give us a call at 877-494-4655.

Recommended blogs for you:

• "4 Steps to Maintain Compliance for Your Ministry"
• "How Much Should Churches Pay Pastors?"
• "When is the Right time for Your Church to Build?"

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