How to Build Your Business Credit Score, Fast

You’ve probably got a good understanding of your personal credit score—it’s based on your credit history, and lenders use it to decide whether to let you borrow money through credit cards, loans, mortgages, and similar. Just like you have a personal credit score, it’s also possible for your business to have its own, independent credit score—and just like a personal credit score, you want it to be as high as possible.

Several of the steps for boosting your business credit score are the same as improving your personal one:

  • Using your credit responsibly
  • Making repayments on time
  • The age of your credit accounts

These are all very important, but there are several other steps you can take to establish business credit quickly. It’s worth boosting your business credit as you’ll get better access to business financing, you’ll pay less interest, and you’ll get more favorable terms. 

Let’s get into it.

Create Your Business as a Separate Business Entity

For your business to have its own credit score, it needs to be “legally separate” from you. If you’re a sole proprietorship (the default business type), then your business isn’t separate and lenders will use your personal credit score when deciding what to let you borrow.

If you create a separate business, then it’s the business itself that has a score assigned to it, independent of your personal credit score. To form your business you will need to:

  • Think of a name for your business
  • Gather information about your business
  • Complete some paperwork
  • File it with your state
  • Complete some further steps

Fortunately, this isn’t complicated—there are plenty of inexpensive online business formation services that can walk you through the whole process and tell you everything you need to do. Once you have a notification that your business has been created, you can take the next steps.

Get an Employer Identification Number for Your Business

Business credit scoring agencies use your Employer Identification Number (EIN) to uniquely identify your business. You can get an EIN online from the IRS at no charge. Alternatively, many online business formation services will get an EIN for you for a small fee.

Setup a Separate Business Bank Account

If you’ve formed a separate business, that business must have its own bank account—you cannot simply use your personal account. Most banks will offer business banking services. You’ll need to complete some paperwork and provide information about your business to set up a bank account.

Register with the Business Credit Agencies

There are credit agencies for businesses just like there are for individuals. In fact, Equifax and Experian, which are major personal credit agencies, also have specific business credit reporting services. However, the business credit agency that’s considered to be the industry standard is Dun & Bradstreet

Dun & Bradstreet provides very in-depth business credit reporting and is used by many lenders, suppliers, and vendors to check the creditworthiness of a business. This means you should register with Dun & Bradstreet as early as possible and get what’s called a “DUNS Number.” All of your credit history will be associated with this number. Getting the number is free.

Start Building Your Business Credit History

Now that you’ve got a good foundation to build from, it’s time to take steps to boost your business’s credit score. Here’s what you need to do.

Establish Relationships with Suppliers and Vendors and Ask for a Line of Credit

When you source various products and services from suppliers and vendors, they may offer to extend this to you on credit—they provide the product or service to you now, and you pay for it in a certain amount of time. In many cases, this may simply be them sending you goods and an invoice now, and giving you a certain number of days to pay the invoice. 

It’s important to build trust with suppliers so that they will provide you with more potential credit, as this tells business credit agencies that you’re trusted to make repayments. Helpful ways to build trust with vendors include:

  • Getting references from other vendors and suppliers.
  • Getting a solid contract in place to set expectations around credit and repayment.
  • Ordering small amounts on credit to begin with.
  • Making payments fully and promptly.
  • Developing a good relationship with your account manager.

You’ll also want to check if the supplier reports your repayments to a business credit agency, as not all suppliers do. If they don’t, you may want to consider an alternative supplier.

Get a Business Credit Card

Business credit cards tell lenders and credit agencies that you can manage “revolving” credit. There are plenty of business credit card providers out there, but some may require you to already have a good business track record before they will offer one.

If you’re finding it difficult to get a regular business credit card, look for prepaid business credit cards. These cards let you load money into them and then use that money to make purchases. They’re generally easy to get, and their usage gets reported to business credit agencies. This means they’re a good way to start building a credit history. 

Take Out Business Loans for Small Amounts and Repay Them On Time

Once you’ve started to build your business credit, you should be able to apply for some small business loans. You can start by requesting smaller amounts and establishing a good repayment schedule. Repeating a pattern of responsible repayment over time shows that you can manage your finances well.

Monitor Your Business Credit History and Score

Periodically check your business’s credit history, and the score you’ve been assigned. Review your credit report to ensure everything is being recorded accurately, and quickly correct any mistakes. 

Always Borrow Responsible and Ensure Your Business Can Make Repayments

To summarize the best ways to boost your business credit score:

  • Initially borrow small amounts through lines of credit with suppliers
  • Take out small business loans or a business credit card
  • Borrow only what you need and ensure you have cash flow to repay responsibly
  • Create a business debt schedule
  • Always put aside enough money to make repayments
  • Repay your commitments on time

Get these right, and you’ll be able to build up a healthy business credit score.

Webinar: Writing a Business Plan

If you are applying for financing, a solid roadmap becomes especially important as it is the best way for a lender to get a feel for you and your business.

Disclaimer:  the information provided on this page is meant for general informational purposes only and may not reflect the most current resources and recommendations available. Please consult with your financial, tax, legal, and other relevant advisors when making decisions about your small business.