How do you build business credit? Follow these steps.

4 min read

Get answers to some of the most common questions small business owners ask about business credit, plus find out the steps you need to take to establish and build credit for your business.

If you’ve ever applied for any kind of personal loan—especially, say, a mortgage or auto loan—you know the importance of having strong personal credit. As a business owner, your good personal credit might have helped you get up and running, for example if you used your credit cards or your home equity to finance startup costs.

As your business grows into its own fiscal entity, it’s important to think about ways you can build and maintain your business credit score as well. Let’s take a look at some of the most common questions small business owners ask on this subject, plus the steps you need to take to establish and build credit for your business.

Business vs. personal credit scores: What’s the difference?

The simplest way to understand the difference between a business credit score and personal credit score is by the identification number you provide for the purpose of checking or establishing your credit. For personal credit, it’s your Social Security number; for accounts and transactions related to your business, it’s the federal Employer Identification Number (EIN) for your business.

Several credit reporting agencies handle the reporting and monitoring of personal credit and business credit. Equifax, Experian, and TransUnion are the three major agencies that deal with personal credit. Meanwhile, Dun & Bradstreet, Equifax, and Experian are the top business credit reporting agencies.

What factors make up each credit score type?

A credit score is informed by multiple factors. For personal and business credit, those scoring factors are somewhat different

Personal credit score factors

  • Your payment history to lenders—in other words, your proven ability to pay bills on time.
  • The amount you owe on all accounts, how much you owe on specific types of accounts, and how much of your available credit you’re using on revolving accounts (credit cards).
  • The total number of years in your personal credit history, this looks at the age of your oldest and newest accounts, and the average age of all your accounts, among other factors.
  • The amount of credit access that you’ve newly applied for or acquired versus held long-term.
  • The credit mix of your various debt obligation types: credit cards, car loans, mortgage, personal loans, and so on.

Business credit score factors

There are several different business credit scores that have their own unique formulas to determine your score. But here are some common factors you’ll find:

  • Your business’ payment history.
  • The ratio of your available credit to the amount you’ve used so far.
  • Various demographics, including number of employees, how long you’ve been in business and your industry or line of business.

It’s also important to note that if you’re the sole proprietor of your business, many institutions will check your creditworthiness using your Social Security number, and in some cases may review your personal credit history before extending an offer of credit.

How do I establish business credit?

Setting up credit in your business’ name is an important action to take for your business’ finances, along with these other very important steps.

  • Incorporate your business—as a C corporation, S corporation, or a limited liability company. Incorporating sets up a financial and legal separation between you and your business—which would include your credit.
  • File for an EIN.
  • Establish a bank account for your business.
  • Register for a Business DUNS (Data Universal Number System) Number with Dun & Bradstreet.
  • Request a business credit file for your company from Equifax, Experian, or other business credit reporting agencies.

How do I maintain a good business credit history?

Once you establish business credit, follow these guidelines to make sure you build and maintain a good business credit history.

  • Build credit by setting up new relationships, such as with vendors and suppliers.
  • Make all debt servicing payments on time (or early).
  • Secure short-term funding for your growth from an established lender like QuickBooks Capital, where we report your business’s payment performance to Dun & Bradstreet and Experian’s Small Business Credit Share (SBCS). Paying on time can help you build your business credit history and improve your overall business credit score.
  • Borrow appropriately—don’t max out your credit and have a timetable for paying it back.
  • Check your business credit reports and scores frequently to determine areas for improvement. If you’re a QuickBooks Capital customer, you already have complimentary access to a free business credit score provided to our customers by Dun & Bradstreet.

It’s well worth investing the time and effort to build a strong business credit profile. Having good business credit can get you better rates, access to more capital, and may keep you from having to put your personal credit on the line.

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