10 Steps for Building Your Business Credit Rating

Like personal credit, it’s important to regularly monitor your business credit. Having a business solid score can help you in a number of ways, including:

  • Obtaining a business loan or line of credit more easily and with better terms;
  • Convincing suppliers to extend business credit and/or offer you better payment terms; and
  • Boosting your business’ reputation with potential partners, vendors, and suppliers.

You should begin building your business credit rating as soon as your business is up and running. And if you’re already going, it’s never too late to start. Here are some ways to do it.

1. Consider Incorporating or Forming a Limited Liability Corporation (LLC)

If your business is a sole proprietorship, it may be harder to keep your business and personal finances separate. Building business credit is one reason why forming an LLC or corporation could be the right structure for your business. A Limited Liability Corporation (LLC) combines the limited liability of corporations with certain tax benefits.

2. Obtain Your Employee Identification Number (EIN)

Get an EIN for your business. This 9-digit number, like a Social Security number for businesses, is assigned by the IRS. Having an EIN number can make it easier to open a bank account or secure funding from lenders.

3. Separate Business and Personal Funds

It’s a best practice to operate your business as a separate financial entity. Opening a business bank account and keeping personal and business funds separate not only provides an opportunity to build business credit, but it can also simplify tax preparation.

4. Separate Business and Personal Credit

Business loans—in addition to helping keep your personal and business finances separate—can help build your business credit as well as categorize and track expenses.

5. Pay Your Bills on Time

Paying all of your debts on time—including payments to utility companies, vendors, landlords, credit-line payments, and business credit card companies—is critical to building a strong business credit rating.

6. Have More Credit Available Before You Need It

Consider how much available credit you want on-hand as a financial cushion if you run into a cash flow crunch. If you have more credit available than you need, and keep your utilization across each line of credit to less than 30% you’ll gradually build your business credit rating.

7. Get a Business Loan to Help Manage Cash Flow and Expansion Goals

Business loans and lines of credit are powerful tools for funding necessary expenses, including hiring, marketing, or covering unexpected emergencies. They also enable you to grow your business without relying on high-interest credit cards. They’re a great way to build your business credit rating.

8. Verify Your Information

Make sure the three major business credit reporting agencies have complete and accurate information on your business, including your EIN. Keep them updated on any changes to your business, such as a new address or contact information. Quickbooks Capital partnered with a leading agency, Dun & Bradstreet to provide a free business credit score to to help Quickbooks customers get a better handle on their score.

9. Be Sure Your Creditors Are Reporting Your Payments to the Business Credit Bureaus

Not all companies report payments to the business credit bureaus. Therefore, you may have to ask your vendors directly to do this on your behalf. Quickbooks Capital reports to the agencies to help customers build their credit score.

10. Check Your Business Credit Report Regularly

Once a quarter, check your business credit report and your business credit rating with each of the three credit bureaus. If you spot any errors or inaccuracies, take steps to correct them. You’ll also be able to see if your credit rating is declining for legitimate reasons, such as late payments or overused credit, and take steps to change that behavior. If you’re a Quickbooks Capital customer, you may already have access to a free score provided to our customers by Dun & Bradstreet.

A strong credit rating is critical for small business. Taking these long- and short-term steps can help you have more and better options available when you decide to seek additional funding for your business.

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