Build Business Credit

How to Build Business Credit the Right Way

What Is Business Credit?

In the same way that you make personal credit based on personal financial history, you make business credit based on your business’s financial history meaning how you will manage any credit that is been extended to business, involving credit cards, tradelines from suppliers, lines of credit, and more. While personal credit is tied to the social security number, but business credit has been tied to your employer identification number. As your personal credit shows the reliability as a borrower, the business credit conveys whether your business is a reliable borrower. Although it takes time to get business credit, by taking control over your business’s credit history, you will start to understand it more and see how, over time, different actions affect your credit rating. Hence, if you wonder about how to build business credit then there’re some ways you can use.

Here are some ways of how to build your business credit


Establish a Separate Business Identity

Credit bureaus can’t track the payment history if they do not know that your company exists. While Sally was buying supplies and software for her company under her personal name, those purchases did not build her business credit history. Here’re a few things you can do to alert credit bureaus of your existence so they can start tracking your financial risk and history.

  • Set up corporation or LLC If you run your business as a sole proprietorship, such as Sally, your business credit is tied to your personal credit. Making a separate business entity makes it clear that your personal and business credit and finances are separate. Specifically, the credit bureau Dun and Bradstreet recommends incorporating or setting up an LLC.
  • Get an Employer Identification Number EIN an EIN (employer identification number) is basically a Social Security Number for your business. It is free to get one from the IRS, and you are needed to have one if you’ve employees or if you are taxed as a C corporation or LLC.
  • Get a DUNS number is another identifier used to track businesses. It is monitored by Dun and Bradstreet, and it is free to apply for one online. You will also require this number if you plan to apply for federal contracts.
  • Get a business phone number A dedicated phone number listed in your company’s name offers extra credibility. You will need also to sign up for a DUNS number, other accounts in your company name, which go to secure your business credit.
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Open a Business Bank Account

As we stated above, it is important for the purpose of building business credit, and in general, to separate your business and personal finances. Additionally, to select the business entity, opening a bank account is an important step to drawing a line between business and personal expenses. By opening this account, business credit bureaus will simply be able to see what money you are taking out of and putting into your business, and will report that information on your business credit report.

Open a business credit card

If you have been using a personal credit card to pay for business expenses, now’s the time to stop. You should open some business credit cards that are not tied to you personally. You will require to verify they report to the business bureaus when applying. Most business cards will involve travel points or cashback programs money you can use to reinvest into your business.

Use Vendors that Report to Agencies

Working with vendors that supply equipment and inventory to your business can help you establish a strong history of paying your bills as well as honoring agreements with partners. This’s still another way you may build your business credit. However, ensure you select vendors that really report to credit bureaus. Some of these include Quill, Grainger, and Uline. In Sally’s business, she can have easily bought office supplies here and there. But signing up for an account with Quill and making regular payments make sure, her company is building business credit that gets reported to the right agencies.

Pay on Time or Early

When you sign up for business credit cards as well as vendor agreements, you have to pay your bills on time if you need your business credit score to go up. Paying by the due date is sufficient for most business credit bureaus. However, Dun and Bradstreet reward companies that pay debts one month or more beforehand. Most importantly, avoid any late payments that lead to things such as tax liens and judgments against your business, since these can dramatically drop your business credit score.

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D-U-N-S number

Once your business is legally established, you should check for seeing if it is listed with Dun and Bradstreet. They’re one of the main credit bureaus, and its PAYDEX score is used in most trade credit applications. If D and B do not have a file for you, you can register for a D-U-N-S number for free.

Establish Trade Lines with Your Suppliers

If you have followed steps 1 through 5, then you have laid a solid foundation upon which to establish business credit. To keep building business credit, then, there are a few more best practices you can follow. One good practice is to maintain and establish better relationships with vendors and suppliers. Just as with your personal credit, you will build business credit as you bring on a variety of different suppliers, lenders, and vendors have given that you maintain a great relationship with them.

Borrow from Lenders Who Can Report to the Business Credit Bureaus

If you are repaying your credit cards and loans on time and in full, you may be proud of your stellar payment history. However, you will want to make sure that you are getting recognized for this great behavior and building business credit from your success.

Keep Business Information Current with the Bureaus

Every business credit bureau collects different info and has different scoring models. On top of this, different suppliers and different lenders report different types of data. This being said, because a lender and supplier could pull your business credit report from any or all of the 3 main bureaus, it is essential that you keep an eye on each of your reports maintaining all three of them. These bureaus let you update basic information about your business and upload financial documents. The more complete your profile is at each of the business credit reporting bureaus, the better.

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