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How to Build Business Credit in 7 Steps

by Vince Calio8 minutes / June 24, 2024

For small businesses looking to grow, getting access to the right financing is crucial. Having good business credit makes it easier to qualify for loans and other forms of financing so you can easily access the funds you need to manage emergencies, consolidate debt, pay employees, or invest in new equipment. Building and maintaining strong business credit can take time, but the benefits are well worth the effort. This article covers the steps you can take to build strong business credit and grow your business.

How Business Credit Works

Just as your personal credit score represents your creditworthiness based on how responsibly you use loans and credit cards, manage debt, and make payments, your business credit score involves the same considerations for business accounts. Credit bureaus collect information from creditors and other sources and use it to calculate your business credit score. This score, which typically ranges from 0 to 100, helps lenders assess your business’s creditworthiness and determine whether to approve your business loan application.

Your business lenders report your payments and account information to business credit bureaus like Dun & Bradstreet, Equifax, and Experian. Each bureau produces a credit report and uses a scoring model to assign you a credit score based on your ability to manage debt effectively.

These credit bureaus make your business credit score and report available to lenders who use the information to assess your creditworthiness for a loan or similar financial product.

Business Credit vs Personal Credit

While business credit and personal credit are similar in many ways, there are some key differences worth noting.

Identification numbers: Business credit is tied to your business’s Employer Identification Number (EIN), while personal credit is tied to your Social Security Number (SSN).
Score ranges: While personal credit scores typically range from 300 to 850, business credit scores range from 0 to 100.
Contributing factors: Factors like your payment history (to creditors), the age of your oldest credit account, and credit utilization are important contributors to business and personal credit. Scoring models for business credit may also consider the age and size of the company, industry risks, and established trade lines.
Access to credit reports: Consumer credit reports are accessible to the subject of the report, as well as to lenders, landlords, and other parties providing services to the individual. However, business credit reports are public, and anyone can request access to them.
Lender preferences: Lenders may vary in their approach to credit review based on factors such as the age of your business and established credit lines. If you already have business credit accounts and have built business credit, your personal credit may not matter as much. However, for newer business owners, your personal credit will usually determine your creditworthiness. Some business lenders may consider both personal and business credit as part of their evaluation process.

Why Build Business Credit?

While some business owners can get by on the strength of their personal credit, there are good reasons to work on building business credit. You don’t want upheaval in your personal finances to affect your business growth and financing prospects. Additionally, there are some benefits to having a good business credit score, including:

More financing options: Good business credit can make it easier to qualify for a variety of financing options, including loans, lines of credit, and business credit cards.
Lower interest rates: With good business credit, you may qualify for lower interest rates on loans and other forms of financing, saving your business money over time.
Higher rate of approval: Lenders are more likely to approve loan applications from businesses with good credit histories.
Prepare for future growth: Building business credit takes time, so it’s important to start early, even if you don’t currently need financing. Establishing good credit now will make it easier to access funds when your business is ready to grow.

7 Steps to Build Business Credit

Building business credit can take time, but the rewards are significant. Once you establish a line of credit for your business, it’s a simple matter of making timely payments and ensuring that you borrow only what you can repay. Get started with these steps.

1. Register Your Business

Register your business with the appropriate state and local authorities. This will establish your business as a separate legal entity and make it easier to build credit in your business’s name. At this time, you should also make sure you have an EIN; if you don’t you can apply for one through IRS.

2. Open a Business Bank Account

Open a business bank account to separate your business and personal finances. This will help you keep track of your business’s income and expenses and make it easier to establish credit with vendors and lenders.

3. Apply for DUNS

A Dun & Bradstreet DUNS Number (short for Data Universal Numbering System) is a nine-digit unique identifier for businesses. While you don’t always need a DUNS number to own or operate a business, you may be asked for one when you apply for a business loan or credit. You can get a DUNS number for free through a simple application process on dnb.com.

4. Establish Trade Credit

Working with vendors or suppliers offers you the opportunity to establish a trade line where you make payments days or weeks after you’ve received your products. Trade credit can help improve your business credit score if your vendors report payments to credit bureaus.

You can build a trade line with any vendor, from your stationery supplier to any manufacturer that you purchase from.

5. Open a Business Credit Card

A business credit card can be an easy way to help build credit for your business. You don’t always need established business credit to get a credit card; instead, issuers can use your personal credit to evaluate your creditworthiness. Make timely payments and keep your credit utilization low to start building a good credit score.

6. Apply for Business Financing

Obtaining a small business loan or line of credit can help further establish your business’s credit history. Be sure to choose a lender that reports your payment history to the major credit bureaus. Once you’ve received your loan, it’s important to make payments in full and on time to ensure your payment history remains positive.

7. Monitor Your Credit with Bureaus

Regularly monitor your business credit reports with the major credit bureaus, including Dun & Bradstreet, Experian, and Equifax. Check your reports for errors and dispute any inaccuracies that could be hurting your credit score.

Tips to Maintain Good Business Credit

After building good business credit, small business owners should take steps to maintain their solid credit score. Here are tips to maintain a healthy business credit score.

Continue a Positive Payment History

Continuing to consistently make on-time payments to your loan, credit card, or other form of financing helps establish a positive payment history. Your payment history is an important factor in your business credit score, so maintaining a positive record can help improve your business credit.

Build Solid Connections with Vendors and Suppliers

Timely payments and strong communication with vendor sand suppliers can lead to positive reporting to credit bureaus, further improving your business credit profile. In addition, better connections could lead to more favorable trade terms.

Diversify Your Business Credit Mix

Having a diverse mix of credit accounts, such as trade credit, business loans, and business credit cards, can demonstrate your ability to manage various types of credit responsibly. This mix of account types can contribute positively to your business credit score.

Maintain a Low Credit Utilization

Aim to keep your credit utilization ratio low, using no more than 30% of your available credit across all of your accounts. A high credit utilization can indicate financial strain and may negatively impact your credit score.

FAQs for Building Business Credit

How do I get credit for my new business?

To get credit for your new business, you’ll need to establish a positive credit history. Start by registering your business, opening a business bank account, and applying for a DUNS number. Then, establish trade credit with vendors and suppliers, open a business credit card, and apply for business financing. Applying for a business credit card is an easy first step since issuers will likely evaluate your application based on your personal credit.

How soon can I build business credit?

You can start building business credit as soon as you register your business and open a business bank account. However, it’s difficult to say how long it will take to achieve a good credit score. The most important thing is to keep business debt under control and ensure that your lenders are reporting your payments accurately and on time.

How do you build business credit fast?

Building business credit takes time. Making timely payments and keeping a low credit utilization ratio can help you build the foundation for a good credit score, but there’s no quick fix to significantly accelerate the process. One key aspect of quickly achieving good credit is keeping negative marks off your credit report. Late payments, defaults, bankruptcy, etc., can decimate your progress and be tough to recover from. Avoiding these financial pitfalls, managing debt responsibly, and tracking your credit reports for any mistakes can all go a long way toward building good business credit.

Vince Calio

How to Check Your Business Credit Score

Credit, Manage Your Money

by Bernadette Abel7 minutes / June 3, 2024

7 Sites to See Your Business Credit Report - and 5 of Them are Free

What’s in your business credit report? Knowing what lenders see when they’re making financing decisions about your business can help you better prepare before applying for credit.

Here are a few things to know about your business credit report. Plus, we cover seven websites that offer reports, including five where you can get a free report.

What is in a Business Credit Report?

Credit bureaus track business credit activity through your EIN (employee identification number); or, if you have one, your DUNS. number. Business credit reporting agency, Dun & Bradstreet, issues this identification number, and it’s free for businesses that have to register with the federal government to receive contracts or grants.

This information helps build your credit report, which contains details on reported past and current borrowing arrangements. These include business loans, credit lines, credit cards, and mortgages. The report may also include information on judgments, liens, and any accounts that may have gone to collections agencies. Your business credit report will also include a credit score, which generally represents how the issuing agency views your business’ ability to make payments on time and in full.

Where to Check Your Business Credit Score

Business credit reports are complied by three companies: Experian, Equifax, and Dun & Bradstreet. To get your business credit report, you need to request a report from one of these three agencies, or through a third party. When requesting your business credit report, you’ll need to provide basic information including your business name, address and contact information. Specific requirements could vary by reporting agency.

7 Business Credit Report Providers

If you’re curious about what’s in your business credit report, check out these seven providers – some of which offer reports for free!

#1. Experian

One of the better known personal credit bureaus in North America, Experian, also offers paid business credit reporting services. Experian provides a one-time business report which includes a credit summary report, credit score, and business summary for one business. Or, you can choose a monthly or annual service with the ability to check and monitor your own business credit reporting and business information in real-time. Through the service, you can also check details on other businesses, such as potential partners or customers.

#2. Equifax

Operating across the globe, Equifax offers an entire suite of business credit reporting services for businesses large and small. While they don’t currently offer a free business credit report, they do off reports for a fee. In addition, their Business Risk Monitor for Small Business service provides public record, credit, and risk score email alerts to notify customers of activities and inquiries impacting their business credit in these areas.

#3. Dun & Bradstreet

D&B Credit Insights lets you monitor changes to your Dun & Bradstreet business scores and ratings; and can notify you – either through email notifications, or via an app – when someone else requests access to your business score. They have three subscription options ranging in cost from free to $149 per month. Take note – while your Paydex score is available through all three subscription options, if you are looking to specifically access your D&B rating, you’ll need to opt for one of the paid subscriptions.

#4. Nav

Credit monitoring system, Nav, gives both individuals and businesses access to free credit summaries. Check your business report summaries from Experian and Dun & Bradstreet — you don’t even need to provide a credit card number to do so. Yet, bear in mind that these are only summaries. If you want access to more detailed business credit information, you’ll need the paid service.

#5. Data Axle

Data Axle (formerly Credit.net) provides purchases of one-off credit reports as well as two credit monitoring subscription options – a monthly plan or an annual plan. With the subscription options you receive unlimited searches and downloads of credit reports. If you opt for purchasing a single report, upon your first purchase you will receive a second report for free.

#6. CreditSafe

Here’s another online option that lets you access a free report before committing to a longer-term paid arrangement. With a CreditSafe free trial, you’ll have access to credit scores and limits, company financials, adverse credit insights and more for not only your own business, but other businesses as well. With your free trial you’ll be given access to view up to five domestic credit reports.

#7. Tillful

Tillful is on a mission to help small businesses reach their full potential by giving them free access to their credit score so owners know where they stand when it’s time to get business financing. With the Tillfull business credit reporting ecosystem, you can access your credit score and learn how it’s measured. You can also connect as many bank and business credit accounts that you want to get a holistic view of business credit. You can access this system as often as you’d like and you can even sign up for email monitoring alerts to let you know in real-time when a change has been made.

How Lenders Use a Business Credit Report

Lenders use the information in your business credit report to help inform financing decisions for credit applications from businesses. They may take into account your business credit score, payment history, length of credit history, and any derogatory or negative information.

Why You Should Check Your Business Credit Report

It’s important to review the information on your business credit report for accuracy. If you find that it is not, contact the reporting agencies to have it corrected as Incorrect information could negatively impact a number of areas of your business including the ability to secure a business loan or other business financing

Knowing what lenders will see on your report can also give you the opportunity to prepare to explain any unusual or less-than-desirable information on your business credit report. And it also gives you an idea of areas for improvement, such as paying bills on time or keeping credit card balances within limit. These steps could make it easier to qualify for business financial vehicles like a term loan or business line of credit.

Why You Should Check Your Business Credit Report with Multiple Bureaus

Business credit reporting bureaus develop calculations to measure your business credit score. However, these calculations vary from bureau to bureau, so your business credit report may be slightly different with each bureau. Checking your report with different bureaus can help you determine your business’ creditworthiness while also letting you review each report for accuracy.

Business Credit Report FAQs

How long does information stay on my business credit report?

The length of time information stays on your business credit report varies. According to Experian, trade data and leasing data can stay for up to 36 months, while negative information like judgments, tax liens and collections can last for over six years. Bankruptcies can stay on business credit reports even longer, lasting 7-10 years. The long-lasting effect of negative information o n business credit scores is one reason why regularly checking your report for errors is so important.

How accurate is a business credit report?

The accuracy of a business credit report depends on the reporting agencies and the information provided by creditors. Because mistakes and errors happen, you should regularly review your business credit report through multiple bureaus to verify the information listed is correct.