Just like personal credit, a good business credit score can help you secure financing, establish relationships with vendors, and grow your business.
Before we get into the tips, let’s lay down some basics on what a credit profile is and what impacts it.
What is a business credit profile?
A business credit profile is the entire credit history of a business. It documents the business credit score and every action that a business has taken that impacts the credit score.
Lenders use a credit profile to determine a business’s ability to pay down debts on time. Regardless of whether it’s a loan, line of credit, or credit card, the lender will base what options are available to you based on the credit profile.
Why is a business credit profile important?
A business credit profile can directly impact the costs a business faces when it uses credit.
Lenders and creditors will base their offerings on a business’s “creditworthiness.” Creditworthiness is an umbrella term that refers to how confident the lender is that the business can pay down its debts.
If the business is deemed to be unlikely to pay back its debts, the lender or creditor will only offer credit options with high costs. This shows up as high interest rates, account fees, application fees, and penalties. This way, if the business defaults on its debts, the lender will have likely made some money on the account through the high costs.
However, if the business is very likely to pay down its debt based on its credit profile, the offerings will be lower cost with lower interest rates, fees, and penalties.
Taking steps to build a strong credit profile can save you money on the credit you need, from the credit cards you use regularly to long-term lending like commercial real estate mortgages.
What impacts a business credit profile?
The direct interactions you have with your credit (such as using the credit or paying it down) will impact your business credit profile, but that’s just a small segment of the overall list.
All of the following factors will show up in your business credit profile and may impact your credit score:
- History of credit usage
- History of credit payments (to creditors and vendors)
- Credit inquiries and credit checks
- Credit utilization ratio
- Age of current credit accounts
- Closing credit accounts
- Opening new credit accounts
- Defaulting on a debt
With all of these factors impacting a business credit profile, how does a business build its credit? Follow our 10 tips to take back control and build a positive business credit profile.
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1. Establish your business entity
Your business can't build good business credit until it's a legal entity, separate from you as a person. This generally starts with registering your business as a limited liability company (LLC) in your state—you can find the information you need on your state's Secretary of State website.
You'll also want to apply for an employer identification number (EIN) from the IRS. If you don't want to register your business at your home address, look into renting a mailbox from a company like UPS.
2. Apply for any necessary licenses and permits
When you register your business, you'll need to pay an annual license fee that lets your business operate in your state. You also may need to pay for a county or city license. Check in with your local chambers of commerce to find out about local business regulations. Be sure to keep your state and local registrations current from year to year.
Some industries have special rules for licensing, such as construction, lawyers, day care facilities, and more. These industries come with additional regulations to protect the public's safety. Check with your state to see if your business requires any special licenses.
3. Open a business bank account
Once your official business entity has the licenses and permits it needs, set up a separate business checking account for your business. This keeps your finances organized—separating your business bank accounts from your personal accounts—and helps you build business credit.
Be sure to accept business payments and pay your business bills from this account instead of your personal bank account or credit cards.
4. Establish trade lines with vendors and suppliers
One of the earliest ways that many small businesses start to build their credit profile is through the vendors they work with. Local vendors and suppliers may let you order products or services and pay for them after they've been delivered. That's a form of credit! By consistently paying those bills on time and maintaining a positive credit history, you can demonstrate your company's reliability and financial responsibility.
5. Connect with other businesses in your industry
Networking with other professionals in your industry is another valuable way to build your business credit. By forming relationships with customers, suppliers, and other businesses in your field, you can establish a positive reputation and increase your chances of receiving favorable credit terms.
Building strong connections also creates opportunities for collaboration and new partnerships that can lead to future growth.
6. Request trade references from suppliers and customers
As you build relationships with other businesses, you may be able to call on those companies as references when you're looking to establish new connections. These references can provide insight into your payment history and reliability as a business partner.
By maintaining positive business relationships, you can increase your chances of receiving favorable trade references and establishing new or larger lines of credit with vendors.
7. Apply for a free DUNS
Registering your organization for a DUNS number can help your business improve its credit score. A DUNS number is a unique nine-digit identifier created by Dun & Bradstreet, one of the three main business credit reporting agencies. This number associates your business with a Dun & Bradstreet business profile so lenders can check your business credit reports, business credit scores, and financial track record.
Over time, this can help you qualify for better loan terms, higher credit limits, and more opportunities for growth and expansion. Make sure to regularly check your business credit report and address any errors or discrepancies to ensure that your credit profile accurately reflects your business credit history.
8. Get a business credit card
Many corporate cards come with requirements such as a certain amount of cash in your company bank account or a certain number of years in business. If you have excellent personal credit, you may be able to apply for a business credit card based on your personal credit history, but then you'll also be personally liable for your business credit. Be sure to approach business credit carefully and read the fine print.
Be sure to choose a card with features and benefits that can help your business grow, and make sure your credit and payments will be reported to business credit reporting agencies to help your company build business credit fast.
9. Apply for a line of credit
Like a credit card, a line of credit lets you use only what you need—so you don't have to take out a small business loan and borrow a lot of money all at once. Unlike a credit card, you can draw cash from a line of credit into your business bank account, so you can use that cash for things you can't buy with a credit card.
Having a line of credit shows lenders that your business is reliable and able to manage credit responsibly. Just make sure you choose a lender that reports to business credit agencies so your timely payments can positively impact your credit score.
For both credit cards and lines of credit, keep your credit utilization low and make payments on time to establish a solid business credit file for your business.
10. Make timely or early payments
Once you do get a business credit card or line of credit, be sure to make timely payments to show that you're managing that credit responsibly. By paying your bills on time or even before the due date, you can demonstrate to creditors that you're a reliable and responsible borrower. This can lead to an increase in your credit score and overall creditworthiness, making it easier for your business to secure favorable terms on loans or lines of credit in the future.
Bonus tip: The BILL Divvy Card
The BILL Divvy Card powered by Visa1 (issued by one of Divvy Pay, LLC’s bank partners.) is a great way to build your business credit score. It reports your balances and payments to the Small Business Financial Exchange to help your business build a stronger credit profile.
It also comes with BILL Spend & Expense software that helps you manage your credit, budget, and expenses. Order physical cards or create as many virtual cards as you like for subscriptions and online purchases—either way, you can set budget limits on each card to control your spending.
With credit lines from $1000–5M2, the BILL Divvy Card makes it easy to access the funding you need.
See how it works. Schedule a BILL Spend & Expense demo for a personalized consultation.
1The BILL Divvy Card may be issued by one of Divvy Pay, LLC’s bank partners. The BILL Divvy Card is not a deposit product. For your specific lender, see your Card Agreement.
2Credit lines and the advertised range are not guaranteed and will be determined upon application approval.
Building business credit FAQs
Here are some quick, easy answers to commonly asked questions concerning business credit.
What's a good business credit score?
Where personal credit scores can be 300–850, a business credit score can be 0–100. A good business credit score is anything above either 75 or 80, depending on the business credit bureau.
A business credit score is reported by a business credit reporting agency (or agencies)—the system is similar to personal credit reports, but a business credit report is based on a different scale.
How long does it take to build business credit?
Building business credit is a gradual process that can take time, depending on your financial history and credit management practices. By consistently following the steps outlined above and making responsible financial decisions, you can build a strong business credit profile over time.
What is the fastest way to build business credit?
The fastest way to build business credit is to establish trade lines with suppliers, apply for a business card, and work with lenders that report to business credit bureaus. By actively managing your business finances, making timely payments, and maintaining a good credit history, you can accelerate the growth of your business credit score.
How do I establish business credit for the first time?
To establish business credit for the first time, start by registering your business, obtaining an EIN, and applying for a DUNS number with Dun & Bradstreet. Then, establish trade lines with suppliers, apply for a business card, and make timely payments to build a positive credit history for your business.
What personal credit score is needed for business credit?
If a business credit application is asking about your personal credit score, chances are any card or loan you received for your business will also hit your personal credit—and you'll be personally responsible for the credit or loan.
That isn't necessarily bad, especially if you have excellent personal credit and your business hasn't been around very long. However, if you don't want your business loan or card to eat into your personal credit, you'll want to apply for a loan or card that doesn't impact you personally.
Can a personal credit card help with building business credit?
While a personal credit card can help you manage your business expenses, it may not directly impact your business credit score. To build business credit, it's essential to use business cards and loans that report to business credit bureaus.
Consider the BILL Divvy Card (issued by one of Divvy Pay, LLC’s bank partners.). It reports customer credit performance to the Small Business Financial Exchange to help businesses grow their credit history and credit score.
