11 Steps for Building Your Business Credit Rating

By Rieva Lesonsky

3 min read

It’s important to monitor your business credit rating, and a strong score can help you:

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

As soon as your business is up and running, you should begin building your business credit rating. 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 credit cards—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. Have More Credit Available Than You Need

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 on each line of credit to 30%. you’ll gradually build your business credit rating.

6. Get a Business Line of Credit

Consider obtaining a business line of credit. A business line of credit gives you the option to access credit when you need it. Tapping into the line of credit occasionally, then paying it back promptly, is another way to build your business credit rating.

7. Don’t Use Too Much Credit

In general, keep your credit usage, which includes any business lines of credit and business credit cards, to a maximum of 30% of available credit.

8. 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.

9. Verify Your Information

Make sure the three major business credit reporting agencies (i.e. Dun & Bradstreet, Experian, and Equifax) 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.

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

Not all companies report payments to the business credit bureaus and you may have to ask your vendors to do so.

11. 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.

A strong credit rating can help you have more options if you decide to seek additional funding for your business, among other benefits. If you want to read more on this topic, go to our article on how to improve your business credit score.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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