Written by Leeron Hoory
Tech and Finance Specialist

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Reviewed by Yoni Cohen
BusinessHeroes Staff

Strong business credit can make it easier for your company to secure access to financing with competitive interest rates, secure loans, and create long-term financial stability. There are several ways to establish business credit, even if you’re just getting started with your company. Read on to learn more about how to build business credit.

What is a Business Credit Score?

A business credit score is a number that represents your business's creditworthiness. Like a personal credit score, this number is used by lenders and creditors to assess the risk of issuing a loan, trade terms, or extending credit to your business. Your business credit score is based on several factors, including how the company manages debt, pays its bills, credit utilization, industry risk and more. 

This score is different from a personal credit score and will also vary depending on the business credit bureau. For example, Experian business credit scores range from 1 to 100, with 62 as the average (which is considered medium to low risk). 

Whether you’re a small business owner with a consulting practice, run an e-commerce store, or own a retail business, there are many reasons you may need to establish business credit. For example, business credit history is a necessary part of securing a business loan with a competitive interest rate or a line of credit. In fact, 20% of business loans are denied due to business credit. 

Steps to Building Business Credit

Incorporate Your Business

Just like personal credit, business credit is established by showing that your business is financially responsible for the debts it incurs over time. Before you can start establishing business credit, you will need to incorporate your business so that it’s a separate legal entity, such as an LLC. 

• Obtain an Employer Identification Number (EIN): When you establish your business entity, you’ll receive an Employer Identification Number. The EIN is like a Social Security number for your business. You’ll need it to open a business banking account, apply for business loans and more.
• Open a Business Bank Account: If you’ve just started your business, maybe you are making all of your business expenses through your personal credit cards and bank accounts.

However, it’s important to keep business and personal expenses separate so that you can keep track of your business's profit and losses and have a clear, accurate picture of your business’s finances. Opening a business bank account will establish your business’s legal identity. 

Apply for a Business Credit Card

Applying for a business credit card is one of the easiest ways to start building business credit. A business credit card works similarly to a personal credit card in that you establish credit as you continue to make payments on time. The application process is similar as well. You can also open a business credit card without an established business identity, which makes the process of establishing business credit easier. If you don’t have a business identity, the bank will use your personal credit score to assess. 

Establish Trade Lines with Suppliers

Establishing trade lines with business suppliers can be one of the best ways to build business credit. Not every business reports to business credit bureaus, but you can establish relationships with the ones that do. Obtaining credit lines from larger vendors can be a challenge when you’re first starting out, so to get a track record, you can start with smaller vendors who are used to working with newer businesses. Their credit limits may be lower, but they may also be friendlier to newer and smaller businesses.

Some examples of suppliers include: 

• Uline: A supplier of shipping materials, warehouse supplies and packing. They offer net 30 accounts, which means you’ll pay within 30 days of placing your order. Uline reports payment to Dun & Bradstreet, one of the three major business credit bureaus. 
• T-mobile or Verizon: If your business needs phones, internet or data services, T-mobile or Verizon can be a good option as a supplier and will help build your business credit. 
• Staples: A supplier of office supplies and other services, Staples also offers a net-30 account and report to major business credit bureaus.

Pay Your Bills on Time (or Early)

Making payments on time is one of the most important factors in building and maintaining a strong business credit score. Your business's payment history is the primary element that credit bureaus and lenders look at to assess the creditworthiness of your business. This is why it’s really important to pay your debt on time, regardless of the amount. Setting up automatic payments with your bank and credit card companies will ensure you never miss a payment.

If you have multiple different payments you need to make, prioritize payments by the due date. Bills that have stricter consequences for late payments should be prioritized as they will impact your credit score more. 

How to Monitor and Improve Your Business Credit

Once you start building business credit, you’ll want to monitor and improve it over time. Here are a few steps to implement to make sure of this:

• Check Your Business Credit Report Regularly: Major credit bureaus track business credit include Dun & Bradstreet, Equifax and Experian. You can monitor your business credit files to make sure all the information being reported is accurate and track any errors early. You’ll want to keep a close eye on any drastic changes to your score that you don’t have a clear explanation for. 
• Correct Errors: If you do find an error on one of your reports, dispute them quickly and with supporting evidence to correct the record. 
• Keep Credit Utilization Low: Your credit utilization refers to how much of the available credit you have you are actually using. You’ll want to keep your credit utilization around 30% to improve your credit score. For example, if you have a credit line of $10,000, you want to keep the amount you borrow to under $3,000. You can request more credit as a way to decrease credit utilization (as long as you keep the amount borrowed the same). 

Build and Maintain Strong Business Credit Early On

When you’re getting started with your business, it’s a good idea to think about the long-term and start building business credit early, even if you don’t need it right away. A strong business credit score will make it much easier to meet your company’s future financial needs and goals, like securing a loan.

About Leeron Hoory: Tech and Finance Specialist

Leeron, based in New York City, writes about technology and finance for top publications like Forbes Advisor, Quartz, and Popular Mechanics. With her expertise, Leeron simplifies complex subjects, guiding you through the latest trends and strategies to boost your business.

About Yoni Cohen

Yoni Cohen is a contributing writer and editor for BusinessHeroes.com. Yoni started out in journalism as a breaking news editor, but soon moved on to become a senior lifestyle and technology editor and has 15+ years of experience in creating content on topics that really matter to people.