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

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.

• To start with, banks trust you if you have good credit, financing is more affordable, and you’ll manage to get a loan with favorable interest rates and reasonable terms.
• Once you 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.

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.

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.

Most banks ask for an Employer Identification Number (EIN) 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 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.

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. 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.

Getting 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.

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. If you make on-time payments to suppliers, their positive financial reports can work in your favor and raise your score.

Monitor your business credit history.

From 2023 to 2024, the number of credit reporting complaints has doubled. 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.