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7 Simple Steps for How to Build Business Credit Fast

Aug 16, 2019 • 4 min read
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      Having good business credit can be an invaluable tool when it comes to growing your company. It will help you secure better terms with lenders as well as suppliers, and if you ever need to apply for a business loan, a good business credit score will get the lowest rates and largest loan amounts available. As an added perk, good business credit can help you qualify for the best business credit cards, and it helps your business appear more credible and trustworthy.

      Given all of these benefits, it’s important to start establishing good business credit early on. Follow these 7 steps to start building business credit today.

      1. Incorporate Your Business

      If you’re flying completely solo, you can consider your business a sole proprietorship without any additional paperwork. However, incorporating will help establish your business as a separate legal entity, which gets the ball rolling on your business credit file and offers additional legal protections.

      You can choose between 3 main legal structures when it comes to incorporating your business: a Limited Liability Company (LLC), an S Corporation, or a C Corporation. Creating an LLC is usually the fastest and most affordable option, but S Corporations and C Corporations enjoy a greater degree of separation between business and personal finances, which can make it easier to establish business credit. However, they aren’t the right option for everyone and might even result in greater tax liability for your business. It’s important to do your research and consider consulting a lawyer before deciding on a legal structure.

      2. Get an EIN

      You’ll also want to get an employer identification number (EIN) set up with the IRS. This process is simple and free and can be done online in minutes. When you apply for a business checking account or business credit card, you’ll need to provide either your EIN or your social security number. Always put your EIN on any credit application for your business to ensure that your payments will be reported to your business credit report.

      3. Open a Business Checking Account

      Your business should take care of this step early on in the game to ensure that your business finances are separate from your personal finances. While you aren’t always legally required to keep your finances separate, doing so limits your personal liability if anyone should come after your business. It also makes your accounting far easier. The bonus is that opening a business checking account with your EIN can help you establish business credit.

      4. Ask Vendors to Report Your Payments

      To build your business credit, you’ll want multiple lines of credit open with several different vendors and suppliers, whether you’re purchasing inventory, equipment, or services. Unfortunately, your payments won’t automatically show up on your business credit report. When establishing a relationship with a new vendor, ask if they report payments to the business credit agencies. If they don’t, request that they report your payments, and they might be willing to do so.

      5. Open a Business Credit Card

      Opening a business credit card with your EIN is an easy way to build business credit, as long as you use your credit responsibly. You’ll want to maintain a low debt-to-credit ratio, so aim for high credit limits but try to maintain a low balance. Keep in mind that because you haven’t established business credit yet, you’ll need to have good personal credit to qualify for a business credit card. If you have good credit, look for a business credit card with a low annual fee that offers rewards that suit your spending habits.

      6. Never Miss a Payment

      This might sound like a no-brainer, but fiscal responsibility is the most important step to building good business credit. You can complete all of the steps above and still end up with bad credit if you run up large balances and don’t pay them off. If you want to build good business credit quickly, you shouldn’t miss a single payment on anything. That includes bills, including rent and electricity, as well as invoices and credit card or loan payments.

      7. Monitor Your Business and Personal Credit Reports

      As your business credit score climbs steadily upward, you’ll want to monitor it regularly to ensure that all of the information on your business credit report is accurate. You can check your business credit score through the 3 main business credit agencies: Equifax, Experian, and Dun & Bradstreet. Check each report at least once per year, and if you notice any errors, report them to the appropriate credit agency immediately.

      Building business credit is just one of many financial tasks you should be working on as a business owner. Luckily, some of your business’s most important to-do items, such as getting incorporated and setting up a business bank account, also help you along in your journey toward good business credit.

      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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