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Just how important is your business credit score? Having a strong credit score can improve your eligibility for small business loans and business insurance, and it may also improve the price you pay to your suppliers. Working to build business credit can help your company thrive and can give you greater opportunities for future expansions.
Here are some strategies that you can use to improve your business credit profile.
What Is a Business Credit Score?
A business credit score measures how well your business has handled its past financial commitments. Lenders and business partners will use this score to determine the business’s eligibility for the best rates and terms on business loans and other contracts.
Unlike yourpersonal credit score, which ranges from 300 to 850, yourbusiness credit scorecan be evaluated on one of two scales: 1 to 100 and 101 to 992.
A low credit score isn’t always the result of late bill payments. For instance, it can take time for a new business to establish business credit. That’s why it’s important for business owners to monitor their business credit reports and take steps to build business credit.
Ways to Build Business Credit
There are no shortcuts when it comes to building your business credit. Still, every business owner can use the following strategies to improve their business credit profile.
1. Establish Your Business
Many entrepreneurs have experienced the awkward startup phase of owning a business. But make sure you cover all of your details. This means you should take the time to:
- Obtain a business phone number
- List your business in an online directory
- Develop a company website
- Use a consistent business address
- Create aprofessional email address
These steps won’t necessarily build your business credit right away, but they can give your business a greater sense of legitimacy with your clients as well as your lenders.
This step is foundational to all the others. Establishing a professional business identity early on can make it easier to secure affordable bank loans and selectively work with vendors who report to major credit bureaus.
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2. Open a Business Bank Account
In the early days of your business, it may be tempting to use your personal assets to cover a few business expenses. But this is unwise. It can make it more challenging to sort out your personal and business expenses during tax season. But more significantly, using your personal finances will prevent you from building your business credit profile.
Instead, open a dedicated business bank account as soon as possible. Using this account for all of your business expenses will help you build credit faster.
Mostlocal banksand traditional financial institutions can offer business services. For best results, select a bank that reports data to the major commercial credit bureaus.
3. Register Your Business
Business owners should expect to register their businesses with their state. This will require you to declare your legal structure. By default, your business will be classified as asole proprietorship, but you can also structure your business as a:
- Partnership (requires one or more business partners)
- Limited liability company (LLC)
Each of these has advantages and challenges of its own. TheU.S. Small Business Administration sitecan help you choose the right structure for your business.
It’s not uncommon for some organizations to conduct business under a fictitious business name. If you’re a sole proprietor, you can register a doing-business-as (DBA) business name with your state.
You’ll also need to obtain anemployer identification number(EIN) from the IRS. Depending on your industry, you may be required to obtain licenses and permits to operate.
All of this information will become a matter of public record, which allows business credit agencies to start developing your business credit profile.
9 Ways to Build Business Credit In 2023
4. Apply for a DUNS Number
You can get aDUNS number online, which will identify your business with the commercial credit reporting agency Dun & Bradstreet. Your business may already have a DUNS number, but if not, you can request one for free. This ensures that your business will be monitored by a major business credit bureau, which can help you build credit.
Other credit reporting agencies — including Equifax, Experian, and Creditsafe — will have numerical identifiers of their own. You won’t have to submit a request to ensure that you’re visible to these agencies.
5. Make Purchases with a Business Credit Card
One of the fastest ways to build business credit is through a business credit card. Assuming you pay the balance on time, you’ll build credit each time you use the card.
If you’ve already opened a business bank account, your financial institution will likely have options for a business credit card. You may even be able to benefit from reward points, cash back, or other incentives.
Just be cautious about how you use your credit card. Late payments can hurt your credit score, but so can yourcredit utilization ratio. This is the total of all your credit balances divided by all your credit limits. Said a different way, it’s the percentage of your monthly credit limit that you’re using. If you consistently keep your balance over 25% to 30% of your credit limit, you can harm your business credit.
To keep your credit utilization low, consider opening multiple business credit cards (though no more than two to three). This will allow you to juggle expenses between accounts, making you less likely to exceed this 25–30% threshold.
6. Keep Track of Your Monthly Bills
Nothing hurts your credit score like late payments. Sure, everyone knows how important it is to pay their bills on time, but first-time entrepreneurs can quickly become overwhelmed by the sheer number of professional responsibilities, allowing certain expenses to slip through the cracks. Even a payment made a day or two late can reduce your credit score.
Set aside a day on the calendar on which you pay all of your bills at once. Ideally, aim for a day at least a week before the final deadline, which can give you a buffer if you need to send physical checks through the mail.
You can also speed up the process by setting up automatic payments with your business bank account. This ensures that you’ll always make your recurring payments and avoid late fees and dings on your business credit score. But make sure that you account for these payments, or you could overdraft and face other penalties.
7. Rely on Suppliers that Report to Major Business Credit Bureaus
Whenever possible, work with suppliers, vendors, and financial institutions who report to the major credit bureaus. By doing so, you’ll have a better chance that your timely bill payments will be recorded on your credit report, which can contribute togood business credit.
Keep in mind that not every vendor or bank will report directly to these institutions. If you’re looking to build business credit, you may want to select business relationships that align with this goal.
When in doubt, ask your vendor or bank if they report to a commercial credit bureau. and which one. Try to aim for at least two to three vendor and business accounts that directly connect to a major credit reporting agency.
8. Use a Business Loan
Using small business loans can help you build your credit score. As with any loan, you’ll want to borrow carefully, invest the money wisely, and make all payments on time.
If you just launched your business, you may still be able to secure business loans through a nontraditional credit history. Ask your lender if you can submit records of bill payments or other financial documents to establish your creditworthiness. You’ll then be able to start building credit the traditional way once you repay the loan.
You can also look into loans guaranteed by the government’sSmall Business Administration.
If you don’t need financing and your priority is building your business credit score, look intoCredit Strong’s credit-builder loans for businesses.
9. Monitor Your Business Credit Score
One of the easiest ways to build business credit is by correcting errors on your business credit report. You can receive a free business credit report each year from the major business credit bureaus:
- Dun & Bradstreet
Checking your business credit won’t hurt your score if you only pull your report once each year. As a business owner, make a habit of performing an annual checkup to assess your business’s financial health.
If you discover an error in your credit history, report it immediately to the bureau that supplied the report. Erasing that error may vastly improve your business credit score. Remember that errors can take time to fully disappear from these reports, which is why it’s important to locate and report errors as soon as possible.
How Long Does It Take to Build Business Credit?
Building strong business credit doesn’t happen overnight. If you’ve just launched your company, it may take roughly a year before you develop a strong credit profile. Established businesses that practice these strategies might see improvements after a year.
Watch Your Numbers Carefully
The importance of your business credit score can’t be overstated. But by adopting a few basic strategies, you’ll be in a great position to build or improve your business credit, which can help you secure the financing you need to launch, maintain, or grow your business.
You're aiming for a score of at least 75 in order to start getting favorable terms and taking advantage of having a strong business credit rating. The basic steps to start the process of establishing credit for your LLC are as follows: Get an EIN from the IRS. Register for a D-U-N-S number.What is the fastest way to get business credit for an LLC? ›
- Step 1 – Choose the Right Business Structure. ...
- Step 2 – Obtain a Federal Tax ID Number (EIN) ...
- Step 3 – Open a Business Bank Account. ...
- Step 4 – Establish Credit with Vendors/Suppliers Who Report. ...
- Step 5 – Monitor Your Business Credit Reports.
You're aiming for a score of at least 75 in order to start getting favorable terms and taking advantage of having a strong business credit rating. The basic steps to start the process of establishing credit for your LLC are as follows: Get an EIN from the IRS. Register for a D-U-N-S number.How to get a 100 business credit score? ›
- Legally Register Your Business.
- Get a Business Credit Card or Banking Account.
- Work With Vendors Who Report Payments.
- Pay Your Bills on Time.
- Use Net Income To Finance Your Debt Obligations.
- Check Your Score Periodically.
Apply for business credit
One of the first steps you'll want to take is to register for a Dun & Bradstreet number , or DUNS number. A DUNS number is a unique nine-digit identification number for each physical location of your business. Dun & Bradstreet also offers guidance on how to build business credit .
- Establish Your Business. ...
- Open a Business Bank Account. ...
- Register Your Business. ...
- Apply for a DUNS Number. ...
- Make Purchases with a Business Credit Card. ...
- Keep Track of Your Monthly Bills. ...
- Rely on Suppliers that Report to Major Business Credit Bureaus. ...
- Use a Business Loan.
- Formalize your business structure. ...
- Apply for an Employer Identification Number (EIN) ...
- Open a business bank account. ...
- Establish credit with vendors and suppliers. ...
- Partner with vendors who report to major credit bureaus. ...
- Ensure all payments are made on time.
While your personal credit score is tied to your Social Security number, your business credit score is tied to an EIN. This helps you keep your personal financial information private while you build and maintain your business credit score.How to build credit with EIN number? ›
- Register your business and get an EIN. ...
- Apply for a DUNS number. ...
- Open a business credit card. ...
- Establish trade lines with your suppliers. ...
- Pay creditors early. ...
- Borrow from lenders that report to credit bureaus. ...
- Avoid judgments and liens.
Does an EIN have a credit score? EIN is just an identifier for your business. While brand-new businesses may not have a credit score, established businesses typically do establish a credit profile over time, making it easier for them to get corporate credit cards.
640 to 700: Business loan providers generally consider a credit score that falls somewhere between 640 and 700 to be good but not excellent. Generally, the minimum credit score for SBA and term loans is around 680.What's the highest business credit score? ›
Business Credit Risk Score
Businesses are ranked on a scale between 101 to 992, with a lower score correlating to a higher risk of delinquency.
Dun & Bradstreet uses a PAYDEX® score, which measures a business's payment history on a 1-to-100 scale. A score of 1–49 indicates a high risk of late payment, 50–79 indicates moderate risk, and 80–100 represents low risk. To view your credit file, you'll need the CreditBuilder™ Plus product.How much is a DUNS number? ›
Obtaining a DUNS number is absolutely Free for all entities doing business with the Federal government. This includes grant and cooperative agreement applicants/prospective applicants and Federal contractors.How many accounts do you need to build business credit? ›
Ideally you'll want to establish at least two to three credit accounts with companies that report. More can be helpful as your business grows. These may include: Suppliers and vendors.How to build business credit in 10 days? ›
- Make Sure Your Business Is Legit. ...
- Check Your Credit Status. ...
- Get a DUNS Number. ...
- Get a Business Bank Account. ...
- Get a Business Credit Card. ...
- Set up Autopay for Your Business Credit Card. ...
- Get Your Second Vendor Account. ...
- Get Your Third Vendor Account.
Despite some recent gloomy headlines from Silicon Valley and Wall Street and some painful downturns in the stock market, there are strong signs that 2023 might be an even better year for entrepreneurs to start a business — especially in the online small business space.What are the new tax credits for 2023? ›
The 2023 changes include amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit. Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 for the 2022 tax year.What business is booming in 2023? ›
The future of the global economy lies in Artificial Intelligence (AI). AI is expected to be one of the fastest-growing industries of 2023, already valued at $328.34 billion. AI has begun to revolutionize many industries, such as healthcare, finance and transportation.What is the highest credit score possible 2023? ›
Most credit scores that lenders use in the United States range from 300 to 850. And when people talk about achieving the “highest” credit score possible, they're usually talking about the ever-elusive 850 FICO® Score. Earning a perfect 850 FICO Score isn't common, but it's certainly possible.
Over one million new businesses opened in 2022, and 43% of American adults plan to form their own businesses in 2023.Can I start a business with a 700 credit score? ›
If your score is between 700 and 800, you'll have a strong chance at approval. If your score falls under 680, you'll likely face difficulty finding approval for many startup business loans—thankfully, there are other options available for you, like invoice factoring.How long does it take to build LLC credit? ›
For new businesses, it usually takes between one to three years to build enough credit to be eligible for small business loans. If you continue to pay back your loans on time, your small business credit will continue to grow.Is it easier to get business credit with LLC? ›
One of the biggest benefits of establishing credit for your LLC is the ability to get access to more financing options. Some lenders simply won't lend to sole proprietorships; your business must be its own legal entity.Can you get business credit right away? ›
Experts say it can take three years or more to build business credit, but some creditors may only require one year. If you're trying to establish credit for a new business, these steps can help you get started.How fast can you get approved for business credit? ›
It can take anywhere from a few minutes to a few weeks to get a business credit card, though on average it shouldn't take more than 10 to 14 days. In many cases, a business may receive “instant approval” for a business credit card, but it may take longer to come to a decision other times.How do I use my Ein number for credit? ›
How Do I Use My EIN Number To Apply for a Credit Card? Some credit card applications ask for an EIN by default, while others ask for a SSN. If you're applying for a credit card and the application asks for your SSN, you can usually substitute your EIN number without a problem.Can single member LLC build business credit? ›
Build Credit for a New Single Member LLC
You can build credit as an LLC fairly simply once your business is established. Simply get credit accounts that will be reported to your business credit reports and pay them on time. These may include vendor accounts, business credit cards and small business loans that report.
- Form an LLC or incorporate to help separate your personal credit from that of your company.
- Apply for an EIN number. ...
- Start a business bank account. ...
- Apply for a business credit card. ...
- Pay all bills and invoices on time to build your credit history and reputation with vendors.
Businesses are ranked on a scale between 101 to 992, with a lower score correlating to a higher risk of delinquency. A good Business Credit Risk Score is around 700 or higher.
While LLCs can be started at any credit level, there will be some notable disadvantages for business owners who have bad credit. Here are a few examples: Money will be hard to come by. Having bad personal credit will generally make it more difficult to get a bank loan to start or expand your LLC.Can I build business credit in 6 months? ›
If you make sure your business is registered with the correct credit agencies, create business accounts that report to the business credit bureaus, and pay your bills on time, you should be able to establish good business credit in a few months to one year.Can I use my EIN instead of SSN when applying for credit? ›
A Social Security Number (SSN) or another tax identifier is required to apply for an EIN, but once assigned, EINs can often be used on credit or loan applications in lieu of SSNs.How to get business credit for dummies? ›
- Incorporate your business. ...
- Obtain an EIN. ...
- Open a business bank account. ...
- Establish a business phone number. ...
- Open a business credit file. ...
- Obtain business credit card(s) ...
- Establish a line of credit with vendors or suppliers. ...
- Pay your bills on time.