How to Build Business Credit: A Step-by-Step Guide for New Owners

If you want your company to borrow on its own name, you need to build business credit. A business credit profile is separate from your personal credit report. It lives with different bureaus, uses different scores, and grows in a different way. This guide walks through the steps in order.

What is business credit?

Business credit is a record of how your company handles its bills and debts. Lenders, suppliers, and landlords may check it before they extend terms to you.

The main business credit bureaus are Dun & Bradstreet, Experian Business, and Equifax Business. Each keeps its own file on your company. For example, Dun & Bradstreet issues the PAYDEX score, which runs from 1 to 100. A score of 80 generally means a business pays its bills on time.

In short, your personal FICO score and your business scores are separate. A strong personal score does not automatically create a business profile.

Why it pays to build business credit

A solid business profile can help in a few ways. First, it can make it easier to get vendor terms, such as net-30 accounts. Second, it may help when you apply for business loans or credit cards. Third, it helps keep business and personal finances apart, which many owners prefer.

That said, many lenders still look at the owner’s personal credit, especially for newer businesses. So business credit adds to your options; it does not replace good personal credit.

Step 1: Set up your business properly

Lenders want to see a real, separate business. Before you apply for anything, put the basics in place:

• Form a legal entity, such as an LLC or corporation.
• Get an EIN from the IRS. It is free. Our guide on how to get an EIN covers the steps.
• Open a business bank account in the company’s name.
• Use a business address and phone number that match across your records.
• List the business online with consistent details.

Step 2: Get a DUNS number

Next, register with Dun & Bradstreet for a DUNS number. This is a unique nine-digit ID for your company. Dun & Bradstreet offers a free option to get one. Once you have it, the bureau can start a file for your business.

Step 3: Open accounts that report

Now you need payment history. Many owners start with vendor accounts that offer net-30 terms and report to the business bureaus. You buy supplies, then pay the invoice within 30 days.

However, not every vendor reports to every bureau. Before you open an account, ask which bureaus they report to. Then pay on time, or early, every month. Over time, those payments build your file.

Step 4: Move up to business credit cards and lines

After a few accounts report, many owners apply for business credit cards or small lines of credit. Keep balances low and pay on time. In addition, check your business reports from each bureau so you can spot errors early.

Mistakes to avoid when you build business credit

• Mixing personal and business spending. It blurs the line lenders want to see.
• Inconsistent business details. A different address on each record can cause problems.
• Assuming every account reports. Confirm it first.
• Paying late. Late payments can lower scores such as PAYDEX.

Get guided help

If you want a step-by-step plan, Kevinomics offers financial education on personal and business credit, funding strategy, and wealth building. Its business credit building program walks owners through DUNS, EIN, and NAICS setup, the three business bureaus, vendor tradelines, and PAYDEX.

Disclosure: Kevinomics is a sister brand of Creative Geniusess. Kevinomics provides education, not legal, tax, or financial advice.

For personal credit, see our guide to the credit utilization ratio.

The bottom line

To build business credit, start with a properly set-up company, get your EIN and DUNS number, and open accounts that report. Then pay every bill on time and check your reports. It takes time, so the best day to start is today.

This article is for education only and is not financial, legal, or tax advice.