A Step-by-Step Guide on How To Build Business Credit

Written By
Julija A.
January 17,2022

Not many people dare to venture into establishing a new business in these times of unprecedented uncertainty. But after the pandemic forced thousands of small businesses to close their doors, some believe it’s time to turn the page and address growing consumer demand.

If you’re among the enthusiastic new business owners, we’re here to help you build a good foundation. Figuring out how to build business credit is a common quest among those venturing into the world of entrepreneurship, and with the right steps and planning, you’ll be well-positioned for financing in no time.

Why Is Good Business Credit a Must?

Those starting up a new business usually don’t need a loan right away. But you might need one down the road, and for that, you’ll need the best credit score possible. So what are the benefits of having good credit?

  • To start with, banks trust you, financing is more affordable, and you’ll manage to get a loan with favorable interest rates and reasonable terms.
  • The million-dollar question is how to build a business credit score. Once you figure it out and secure a solid score, some vendors may not require prepayments for their B2B products and services.
  • You’ll manage to establish better terms when negotiating with suppliers and lenders: lower prices and interest rates and extended contract lengths. A good business credit report is your bargaining chip.
  • You’ll be able to separate your personal and business finances, and you won’t be required to offer guarantees for a business loan and risk your personal assets.
  • We’ll show you how to build business credit without a personal guarantee. While doing so, you’ll be creating healthy financial habits and a stable and sustainable company in the long run.

Tips and Tricks on How to Build Credit Fast

Starting a new company requires time, effort, and a pinch of luck. You’ll need to secure proper funding, and applying for a startup loan might be a good idea. But first, you need a good credit score. We’re here to help you build business credit as you embark on your entrepreneurship journey.

Establish your business and put it on the map.

We know that this might sound obvious, but some new entrepreneurs forget to start with the basics. Building business credit begins from scratch: get a business phone number and open a business bank account with your legal business name and a business credit file. Now you’re up and running, and you can start climbing the success ladder.

Apply for a federal Employer Identification Number and D-U-N-S number.

Don’t think you’re all set just because you have a Social Security number. Your business needs one, too. If you’re trying to figure out how to build business credit with an EIN, you should know that most banks ask for one of these when you’re opening an account under your business’s name.

You’ll also need the number to identify yourself as a business entity, secure a business contract, or apply for a business credit card. But don’t worry, you can get one for free.

Another number that you’ll need to build business credit is a free D-U-N-S number. You’ll get one if you register with Dun & Bradstreet, and you can use it to track your business information and make regular updates.

Get a business credit card to build your credit.

Now that you’re equipped with EIN and D-U-N-S numbers, you’re ready for the next step - applying for a business credit card. You can’t build your business credit quickly if you don’t have one. With a credit card, vendors will report your payments to credit bureaus, and you’ll establish a good track record with the bank. If you’re running a small business, credit cards can play a crucial role in helping you secure financing for equipment and other necessities.

Pay your vendors on time and in full or early.

The faster you pay the bills, the higher your credit score gets. This is important to know when you start thinking about how to build your business credit. On-time payments will also get you better terms with lenders. Delaying or defaulting on bills sends a lousy message to creditors and results in negative reports with credit agencies. However, some of them will give you extra credit for paying the bills early.

How to get credit by structuring your company?

Even though a specific structure doesn’t impact your business credit report, having one makes your firm appear more legitimate and ensures that your personal and business assets are separated. If you’re trying to figure out how to build business credit for an LLC, you should know that such a structure exists as an independent entity and separates the enterprise from the owner. That means your personal assets won’t be at risk if things get tough.

Cooperate with suppliers and vendors that report payments.

Ask your vendors and suppliers to report your payments to credit agencies because they’re not obliged to do so. Why is this one of the crucial ways to build credit? Well, if you make on-time payments to suppliers, their positive financial reports can work in your favor and raise your score. Maintaining a good relationship with industry-relevant vendors can serve as a key asset when trying to figure out how to build business credit.

Monitor your business credit history.

Last year, consumers filed more than 280,000 complaints related to their credit reports. Errors in these reports can be difficult to correct, affecting your business reputation and making it harder to borrow money. Make sure to keep an eye on your business credit history every once in a while. If you find an error, promptly file a dispute with your credit bureau and get it corrected as soon as possible.

If you diligently monitor your business, you’ll notice if your score is getting worse. Figuring out how to build business credit with bad personal credit will take some time, but it’s possible. As a last resort, poor credit applicants can apply for a business loan if they meet specific requirements.

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Frequently Asked Questions

How can I build my business credit fast?


There’s no magic potion to get you there, but try to get through all the steps in our guide in a timely manner. Put your business on the map, apply for EIN and D-U-N-S numbers, structure your company, get your credit card and make on-time payments to vendors and suppliers.

How long does it take to build business credit?


Building business credit is more of a marathon than a sprint. Credit bureaus want to see reliability and financial security, and that takes time. Experts say it can take anywhere between one and three years to build business credit.

Can I use my EIN to apply for credit?


If you have a federal Employer Identification Number assigned to your business by the IRS, you qualify to apply for business credit. However, the issuer will require you to provide your Social Security number to check your personal credit rating.

How do I build credit for my LLC?


One of the most commonly asked questions among entrepreneurs is: how to build business credit for an LLC? If your company is structured as an LLC, it exists as an independent entity. This helps you build business credit because it legally separates your business and personal credit profile and assets.

Can you start an LLC with bad credit?


Yes, you can. Suppose you have a bad personal credit score. You can simply form a separate legal entity such as an LLC with a different tax identification number that allows you to open a bank account and start building your business credit score from scratch.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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