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Experian, Equifax, and Dun & Bradstreet all use these common indicators in their reporting of business credit scores:
A solid business credit score can help you:
One of the top reasons that traditional lenders reject most small business owners is bad credit. Building a strong business credit score brings you better rates and terms on small business loans and financing—and that’s only the beginning of the benefits.
If your business ever falls on hard times, a strong business credit score provides a safety net, making it easier to take out emergency loans or lines of credit. On top of that, vendors and suppliers are more likely to do business with you when your credit is solid.
You’re likely here because you’ve asked yourself, “How do I get good business credit?” We’ve helped small businesses receive over 300,000 business loans totaling more than $12 billion. In doing so, we’ve learned a great deal about how to establish, build, and repair business credit. No matter where you are in the process, here’s what you need to do to start building your credit.
These are the first steps you need to take to establish business credit for your business.
Your business must be a corporation or limited liability company (LLC) to be assigned a business credit score. In addition to helping build business credit, establishing your business as a legally separate entity like an S-corp or LLC can protect your personal assets from business liabilities.
Once you’re legally separated from your business as an entity, you’ll next want to separate your business and personal finances. Opening a dedicated bank account for your business makes it easier to track a business’s important financial indicators, like income, financial assets, and expenses. In order to do this, you’ll need to get an employer identification number (or EIN) from the IRS: it’s like a social security number, but for businesses.
After you’ve taken these 2 essential steps to establish business credit, you’re ready to start improving your business credit score.
Business credit score requirements vary from lender to lender, so as much as we wish we could give you a golden number, there isn’t one (sorry). Whatever your business credit score, you’ll benefit from improving it—whether that means helping you qualify for a new loan product or accessing better rates and terms.
Your business bank account should only be used for business expenses. This approach will help you to build business credit, streamline your bookkeeping, and protect your personal financial assets from business liabilities.
If you only take 1 piece of advice for building business credit, let it be this: Making payments on time is the #1 way to build, improve, and repair your business credit score. It’s the cornerstone of credit data and a surefire indicator of creditworthiness. Here are 3 steps you can follow to ensure timely payments:
Once you’ve mastered making on-time payments, you’re ready to take your business credit into your own hands. Opening a business credit card will help you to build business credit in 2 ways. First, it will bolster your history of on-time payments. Second, it will improve your credit utilization ratio, i.e., how much credit is available to your business vs. how much you’re using. Bonus: business credit cards often offer rewards like cash back or travel rewards, so you can make your business expenditures work for you.
Taking out a business loan can help to increase your company’s credit score if your lender reports payments to the credit bureaus. Remember what we said about the importance of on-time payments? When you establish a history of repaying a loan on time, that demonstrates creditworthiness. In turn, you’re more likely to qualify for or secure better rates in the future.
With a variety of loan options—like equipment loans or business lines of credit—to choose from, you can find a loan that can work double duty: meeting your business needs and helping you improve your business credit score at the same time.
See your options
Your business has a credit score—whether you check it or not. Any company, lender, investor, or partner can find your score, so it’s best to be proactive and see it first. You can then decide if the credit score is adequate or if you need to take steps to improve or repair it.
There are free and paid options for learning about your business credit. Let’s look at both—starting, of course, with the free option.
Dun & Bradstreet’s CreditSignal service alerts you if your scores or reports change. However, you’ll have to pay to access your detailed credit report. According to their website, you only get to view your score for free for the first 14 days. After that, you’ll receive alerts on directional changes to your score, not the number itself.
All 3 major business credit reporting agencies offer detailed reports on your credit. These reports are the most informative you’ll find—however, they all cost money:
If you find yourself looking at a low business credit score, worry not. Any credit score can be improved. Follow these steps to repair your business credit:
You need to know what your business credit score is before you can repair it. Not sure how to go about it? We’ve outlined everything you need to know about checking your business credit score.
Credit reports are not infallible. Once you pull your credit report, you want to look for errors—like payments that haven’t gone through or were never reported.
After you find a mistake, you can contact the credit bureau with evidence of your payments or contact your vendor and request that they update their reports with the bureau. There may be a lot of paperwork, so if you’d rather outsource this task, our partner Lexington Law specializes in business credit repair.
Paying down outstanding debts will help repair your credit. Focus on making payments early or on time. If you find yourself struggling to repay a loan or to pay off the balance of a credit card, pick up the phone and talk to your lender before defaulting on the debt. They may be able to help.
We’ve said it before, and we’ll say it again: making payments on time is the single most important thing you can do for your business credit.
As you work to improve and repair your business credit, you may still be able to qualify for a small business loan. Here’s how:
If you need a business loan but your credit score isn’t perfect—don’t panic!
Your credit does play an important role, but it’s not the only thing lenders look at. They care about other things, too:
These factors all play a role in scoring a business loan—not just your credit score. However, if you don’t qualify for a traditional loan, you still have other financing options.
How do you build business credit if you have bad personal credit?
Your business credit and personal credit aren’t linked—but they can be related. If you’re a sole proprietor with little business experience under your belt, lenders will likely look at your personal credit to see how you manage debt.
You can follow many of the business-credit-building best practices even if you have poor personal credit:
What is a good business credit score?
Different credit bureaus use different rating systems, but business credit scores usually range from 0 to 100. Any score above 75 is considered excellent, but most lenders won’t bat an eye unless your score is under 50.
This spread is different from personal credit scores, which usually range between 300 and 850.
How can you build business credit fast?
Credit-building isn’t a race or one-and-done ordeal—it’s a lifelong, business-long pursuit. You’ll need to do the small things right over time, like managing your debt and making timely payments. The quickest way to build your business credit is to make it a priority starting today.
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California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through Lendio Partners, LLC, a wholly-owned subsidiary of Lendio, Inc. and a licensed finance lender/broker, California Financing Law License No. 60DBO-44694.