Business Loans

The Complete Guide to Understanding Business Credit

Oct 08, 2019 • 10+ min read
Man using a business credit card
Table of Contents

      Just like people have credit, so do businesses. If you own a business, your business may already have its own credit score—particularly if you’ve ever borrowed money for your business. 

      Your business credit measures creditworthiness, or how risky you are as a borrower. It’s used by lenders and financial institutions to determine whether or not they’ll lend to you and at what rates. Established businesses typically have both a business credit report, which details the history of your business’s relationship with credit, and a business credit score, which is a number that’s meant to indicate how positive or negative your business’s credit history is. Newer businesses might not have either yet.

      Read on to learn how your business credit score is calculated, where you can check your business credit, and how to build business credit.

      How Your Business Credit Score is Determined

      There are 3 major credit bureaus that compile business credit reports: Equifax, Experian, and Dun & Bradstreet. This means that you could potentially have 3 different credit scores. Each bureau has a slightly different method for calculating your business credit score, but some of the basic factors considered include:

      • History of on-time payments
      • Length of credit history
      • Credit utilization
      • Number of credit lines
      • Collections information
      • Public records

      Each credit bureau also uses a different scale for business credit scores, so your score could look significantly different across the 3.

      Dun & Bradstreet

      Your Dun & Bradstreet credit score includes a variety of scores and ratings that measure different factors. Your PAYDEX score, which ranges from 0 to 100 and measures how risky it is to lend to your business, is the most commonly used. A PAYDEX score of 80 or higher is considered low risk, a score of 50 to 79 is moderate risk, and anything below 50 is considered high risk. The 2 most important factors that contribute to your PAYDEX score are whether or not you pay your bills on time and whether or not your suppliers and lenders report your payments to Dun & Bradstreet.

      Additionally, Dun & Bradstreet calculates a Delinquency Predictor Score, a Financial Stress Score, a Supplier Evaluation Risk rating, a Credit Limit Recommendation, and a Dun & Bradstreet (D&B) rating for your business. 

      The D&B rating is another commonly used number that summarizes your business’s credit history and measures your creditworthiness. In addition to incorporating payment history as submitted by your vendors, your D&B score also uses financial information you submit yourself, your company’s size and balance sheet information, and public records.


      Equifax’s business credit scores also range from 0 to 100 and use your history of payments as supplied by vendors to calculate your score, which is known as your “Payment Index.” Equifax also provides a Credit Risk Score and a Failure Risk Score.

      Your Credit Risk Score measures how likely you are to miss payments. The score is calculated using information like the size of your business, the length of your credit history, your credit utilization, and late payments or delinquent accounts. Your Failure Risk Score measures how likely it is that your business will close in the next 12 months, and it’s calculated using similar information.


      Your Experian business credit score also ranges from 0 to 100, but it’s broader than your Equifax Payment Index and D&B PAYDEX score because it’s calculated using more than just your payment history. The most important factors in calculating your Experian business credit score are:

      • Number of trade experiences
      • Outstanding balances
      • Payment history
      • Credit utilization
      • Liens, judgments, and bankruptcies
      • Age of business
      • Business size

      To calculate your business credit score, Experian looks at payment history, legal filings and company background information gathered from a variety of sources (including your vendors), public records, credit card companies, collection agencies, and even marketing databases. 

      Why Is Business Credit Important?

      Good business credit helps you secure the best rates when it comes time to take out a business loan, open a business credit card, or take out a business line of credit. You’ll qualify for better small business loans and lucrative rewards credit cards. Even if you already have excellent personal credit, a good business credit score can help you qualify for larger loan amounts.

      The importance of good business credit goes beyond borrowing money. As mentioned above, your business’s credit information is publicly available, which means that vendors and suppliers can easily access your credit report. So the better your score, the easier it will be for you to build relationships with the best vendors.

      And, unlike your personal credit, anyone can check your business credit score and credit report. They will have to pay a fee to order your business credit report, though. This availability means that lenders, vendors, and even consumers can access your business credit file if they want to.

      How to Check Your Business Credit

      Now that you understand what business credit is and why it’s important, it’s time to check yours. Checking your business credit score will show you where you can improve, and you should also comb through your business credit report to check for any errors. You’ll want to check your business credit score with all 3 major credit bureaus.

      • Dun & Bradstreet: Order your business credit report online or call them at (844) 238-4821
      • Equifax: Order your business credit report online or call (866) 519-4800
      • Experian: Order your business credit report online

      Ordering your business report isn’t free, and the exact price will depend on how much information you want. Your basic business credit report will cost $39.95 from Experian, $99.99 from Equifax, and $61.99 from Dun & Bradstreet. The cost of more extensive services, like in-depth reports and monthly credit monitoring, is in the hundreds.

      How to Establish Credit for Your Business

      If you don’t yet have a business credit score, there’s no need to worry. However, you’ll want to complete a few tasks to get your business credit established early on so that it can grow over time.

      Register Your Business

      Registering your business as a legal entity will separate it from you and make it easier to establish a business credit score in addition to your personal credit score. You’ll also want to incorporate your business if you haven’t already. There are 3 main structures to choose from when you do this:

      • LLC (limited liability corporation)
      • S corporation
      • C corporation

      The best structure for your business will depend on many factors, such as the size of your business, how much you plan to grow, and what your tax liabilities look like. It’s wise to research these options extensively before deciding.

      Get a Business Checking Account

      If you don’t already have a business bank account, you should—and for several reasons. Having a business checking account makes it easy to separate your finances, which not only makes tax time easier, but it also limits your financial liability and might even be legally required depending on your business structure.

      Opening a business checking account can also help you establish business credit, as the key to making sure your business finances are attributed to your business credit and not your personal credit is to separate your business and personal finances.

      Register for an EIN

      Having an EIN, or an Employer Identification Number, set up with the IRS is another way to signal to credit bureaus that your business’s financial activity should be saved to your business credit file. You can complete this process in minutes by filling out a brief form online. Once you have an EIN, use it in place of your Social Security number to apply for business credit cards.

      Make Sure Vendors Report Your Payments

      You’ll need to ask your vendors if they’re reporting your payments to make sure that your financial activity is contributing to your business credit score. If they aren’t, ask if they’d be willing to. When shopping around for new vendors, this question is important to ask.

      Open a Business Credit Card

      If you’re not looking to borrow money right now but still want to establish credit, opening a business credit card under your new EIN is a great way to do that. Make sure you use the credit card regularly and pay it off in full each month. Those payments should be reported to the major credit bureaus, and they’ll help you build a longer and more robust payment history.

      How to Build Your Business Credit

      Establishing business credit is only half the work. You’re unlikely to start with perfect business credit, so once you’ve established it, it’s time to get to work on increasing your business credit score. Here are some steps you can take.

      Monitor Your Credit

      Monitoring your business credit regularly helps you out in 2 ways. Firstly, it gives you a sense of how your financial behavior impacts your credit score. When you see your score increase, you can try to repeat the action that made it go up. Secondly, it’s not uncommon for credit reports, both personal and business, to contain errors. It’s important to spot and dispute these errors early so you can have them removed from your credit report.

      Dispute Errors on Your Credit Report

      If you do find an error on your business credit report, you’ll want to dispute it immediately. You’ll need to do this with each credit bureau reporting the error. With each credit bureau, you’ll need to either log into your credit account or open up your business credit report, and from there you can dispute any incorrect information. Depending on what you’re disputing, the credit bureau may ask for supporting evidence.

      If your dispute is accepted, the incorrect information should be removed from your business credit report shortly thereafter. Be sure to follow up if the error isn’t corrected after a few weeks.

      Never Miss a Payment

      The best way to build your business credit score is to always make on-time payments, whether to suppliers, landlords, or lenders. Having even 1 payment show up as delinquent on your credit file can seriously impact your business credit score.

      Use Your Business Credit Card

      If you’ve opened a business credit card, using it regularly and paying it off on time every month will help improve your score. The best way to use a credit card to build credit is to put a few fixed monthly expenses, such as utilities or a phone bill, on your credit card and then set up autopay so that your bill is never late. It’s important to pay off your credit card in full each month to avoid paying interest fees.

      Lower Your Credit Utilization

      Your credit utilization is how much of your available revolving credit you use each month. It’s often calculated by dividing the aggregate balances across all of your revolving credit accounts by the aggregate credit limits across those same accounts. The lower this number, the better it is for your credit score. 

      If you’re regularly using up more than half of your available credit limit, consider lowering your credit usage or increasing your credit limit. Limiting how much debt you take on is good for both your credit score and your finances.

      Consider a Small Business Loan

      Loans come with interest fees, so you should never take one on solely to build business credit—you can build credit for free. However, if you’re already thinking about getting a small business loan, it’s worth noting that taking one out and paying it back on time will likely improve your credit score. Just make sure that the loan is worth what you’ll end up paying in interest.

      If you’re taking all of these actions and still don’t see results, know that it takes time to establish business credit. With a little patience and a lot of financial diligence, your business credit score will go up eventually.


      About the author
      Elizabeth Aldrich

      Elizabeth is a freelance writer covering personal finance, business, and travel. Her writing has appeared in The Motley Fool, Business Insider, Yahoo! Finance, LendingTree, Student Loan Hero, FOX Business, and more.

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