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Good business credit history can unlock doors for small business owners. Whether you’re a startup that recently checked your business credit score for the first time — or maybe you want to give your established business a lift — here’s some step-by-step tips to help build your business credit file quickly.
How Do You Build Business Credit Fast?
To build business credit history fast, it takes a combination of building trade lines, establishing an identifiable footprint with an EIN and DUNS number, and applying for a business credit card or checking account to demonstrate a consistent and reliable cash flow.
A good business credit score doesn’t happen overnight. Just like with personal credit, it takes time and effort to build. Getting started as soon as possible can help smooth the way, so here are six actions you can take to start building business credit fast.
1. Get an Employer Identification Number.
An Employer Identification Number (EIN) helps you establish or start building business credit by allowing you to file your business’s tax returns with the IRS or to open a business bank account. If your business structure is a sole proprietor, or another type of legal entity, you don’t always need an EIN.
2. Open a business bank account.
Opening a business bank account is the next step in establishing your business’s credit history.
Some lenders require you to have a business checking account to get approved for a business credit card, business term loan or business line of credit. It also helps further the separation of business finances from your personal finances.
3. Establish your credit profiles.
Business credit is tracked and reported by the major business credit bureaus. Check to make sure your business name has a complete profile with each of the major business credit reporting agencies, such as:
- Dun & Bradstreet (Paydex Score)
- Experian Business
- Equifax Business
- FICO® Small Business Scoring Service
For Dun & Bradstreet, you may also need to apply for a DUNS number. A DUNS number is a unique number that identifies your business credit profile through Dun & Bradstreet.
4. Establish tradelines or get credit from a lender who reports to the business credit bureaus.
To build business credit history, it can help to open one or more new credit accounts in the name of your business. Consider opening:
- Tradelines with vendors
- Net 30 accounts or vendor trade credit
- Small business lines of credit
- SBA or small business loans
Be sure that the lender reports to the business credit bureaus. When you make on-time payments, this helps ensure that these accounts will help build credit history fast.
5. Maintain good credit habits.
Just like with personal credit, maintaining good business credit habits can help you build your business credit history. Some of the things that determine your personal credit score that determine your personal credit score and your business credit score business credit score are similar.
Payment history. Making on-time payments can help build a positive business credit history.
Credit utilization. Limiting the amount you borrow and the amount of your credit limits you utilize can help keep your credit utilization low. This can be beneficial to your business credit.
Age and mix of credit. Older accounts and different types of borrowing can show your ability to manage your businesses finances.
Age of your business. A longer operating history can positively influence your business’s credit rating, since it established businesses often indicate stability and experience.
Risk. If you operate in a risky industry, your company’s credit could be impacted.
6. Monitor your business credit reports.
Now that you have a separate business entity, you’ve established your business credit files, and you’ve been maintaining good borrowing habits, you need to monitor your progress. When reviewing your business credit reports, keep an eye out for errors or inconsistencies on your credit reports and identify areas where you can improve.
You can check your business credit reports with any of the business credit bureaus. Keep in mind that each bureau has a unique system and your scores can look different at each one.
How does business credit work?
Your company’s credit determines the creditworthiness of your business and is separate from your personal credit score (unless it is a sole proprietorship).
Business credit is used by lenders, suppliers and even investors to determine a business’s reliability in financial matters. Business credit works similarly to personal credit, except unlike personal credit reports, business credit reports are generally available to the public. While people typically need a real business reason to run a business credit check, and may need to pay a fee to access the information, your credit information could be more readily available.
Why is it important to establish a business credit profile?
Establishing business credit is important because it can help your business grow, protect your personal finances and offer you more financial flexibility.
Get better financing options. A good business credit score can help you get approved for better financing options. You can get higher credit limits or bigger loan amounts along with lower interest rates and better terms from vendors and small business credit providers.
Protect your personal finances. Establishing business credit separates your personal and business finances. Small business owners that don’t have established business credit may rely on personal loans or personal credit cards to fund their business — which can mess up their personal credit history if business takes a turn.
Build credibility. A strong business credit profile can help build your company’s credibility. This can attract investors and can be important for securing large-scale financing and partnerships in the future.
Expert recommendations for fast ways to build business credit.
“While engaging with small business owners the framework for creating a credible credit profile quickly is grounded in a few key areas, including:
Establish a Trackable Business Identity: The first step is to create a clear separation from your personal finances by securing an Employer Identification Number (EIN) from the IRS
Open the Right Accounts: Get a dedicated business bank account, and establish tradelines with vendors who report to business credit bureaus.
Build and Maintain: Once a credit file exists, responsibly apply for business credit cards or a line of credit to add valuable history, and continuously monitor your business credit report.”
David Adams, Head of Commercial Product Marketing
Equifax
This content is for educational and informational purposes only, and is not intended as financial, investment or legal advice.
Article Contributors
David Adams, Head of Commercial Product Marketing
David Adams is the Head of Product Marketing for the Commercial line of business at Equifax, a global data, analytics, and technology company. With over two decades of technology experience, David brings a data-driven approach to market strategy, specializing in high-growth business segments. David’s career has been marked by a strong focus on the financial services sector, where his six years of dedicated experience in business credit have provided him with a deep understanding of the challenges and opportunities in commercial lending and risk management.
