Want to know how to build business credit without using personal credit?
This post lays out your options, then walks through 7 easy steps to make it happen.
Are business and personal credit linked?
When you first kick off a business, your personal credit can be a foundation for your business credit—a starting point to build on.
Lenders may want to use your personal credit score as a proxy for your business credit score since your company doesn't have its own credit history yet.
Why do business lenders want to see your personal credit score?
Credit scores exist to give lenders an easy way to estimate their risk when you apply for a loan or a new line of credit.
When your score is high, it's a good indicator that you aren't much of a risk—you're very likely to pay back a new loan or manage a new credit card responsibly. When your score is low, that signals to lenders that you might be more of a risk.
Now, credit scores aren't perfect at predicting the future. They're more about playing the odds.
Credit agencies look at lots of businesses over time, finding patterns in the way they handle credit. The more your business matches the patterns of financially responsible companies, the higher your credit score is, generally speaking.
The trouble with new businesses, though, is that they don't have a track record. There just isn't enough information yet to match your company to those patterns. Instead, lenders look at your personal credit, where you have more of a history.
How to leverage personal credit to build business credit
When your business is brand new, you can use your personal credit to borrow money for the business, helping it get off the ground. But that doesn't necessarily mean you should.
Before you hitch your corporate debt to your personal credit score, it's important to weigh the pros and cons of building business credit.
Quick look: Using personal credit for your business
While it can sometimes help build your business credit faster, using your personal credit for your business also makes you personally responsible for that business debt. Creditors can come after you personally if your company doesn't pay back what it borrows.
Fortunately, you don't need to use your personal credit to get your company off the ground. If you want to know how to build business credit without using personal credit, here's how to do it.
7 steps to build business credit without using personal credit
The first three steps will get you started—the rest are either things you can do later or practices that you can follow over time.
Step 1: Set up your business as a legal entity
Start by setting up a formal structure for your business, such as a limited liability company (LLC). This creates a clear, legal separation between you and your business and sets your business up to have its own credit score.
Step 2: Obtain an EIN and open a business bank account
Request an Employer Identification Number (EIN) from the IRS. Instead of using your Social Security number, your business needs its own EIN for tax purposes and to open a business bank account—this keeps company finances separate from your personal accounts.
Step 3: Apply for a business card
Apply for a corporate card instead of using a debit card for your business. Just be sure to choose a card issuer that won't check your personal credit and that will report your credit usage and payments to the business credit bureaus.
The right card can help you build business credit without using personal credit—while also helping you protect your company's finances.
Step 4: Register with Dun & Bradstreet
To kickstart your company's credit history, apply for a D-U-N-S® number. It's your ticket to a business credit file with Dun & Bradstreet, one of the major business credit bureaus.
Step 5: Monitor your business credit reports
Once your business is established as a separate entity with its own business credit reports, be sure to check those reports regularly. If you see any errors on a report, contact the credit reporting agency immediately and ask to have them corrected to protect your business credit score.
Step 6: Work with vendors that extend trade credit
When your business needs goods or services, partner with vendors and suppliers that offer a business line of credit whenever you can. This lets you pay over time—or at least after the goods and services are delivered. Choose vendors that report credit and payments to credit bureaus so you can build your business credit history.
Step 7: Pay on time or early
Prove the financial health of your business by paying your bills on time or even early. A positive history of paying your bills will help your business establish a healthy credit score and grow it over time.
Plus, with the right business card, paying early can help you maximize your rewards points!
Build credit with the BILL Divvy Card¹
The BILL Divvy Card powered by Visa can help you grow your business credit without a personal credit check. It reports credit performance to the Small Business Financial Exchange (SBFE®), so you can build your company's credit score just by paying on time.
Plus, enjoy these benefits and more:
- Get free-to-use expense software with your card for exceptional budget control
- Create virtual cards for greater financial security
- Use our easy-to-use mobile app to capture receipts at the register
- Enjoy seamless integration with your HR software and accounting software
The application process is refreshingly easy. Apply online in just a few minutes.
“BILL Spend & Expense has helped us control our monthly cash flow with options for repayment. It’s a great tool offered with world-class support and a working line of credit at no cost to the business. What more could you ask for?” — Mike Reed, Founder of SAFE Solutions
Business credit FAQs
Here are quick, easy answers to some of the most commonly asked questions about business credit.
What's the difference between personal and business credit?
Personal and business credit are similar in many ways. Where consumer credit bureaus report your personal payment history and credit scores on a personal credit report, business bureaus report your business credit scores on a business credit report.
Building business credit—and your business credit score—is also very similar. Your business builds a positive payment history by paying business credit cards and vendor credit accounts on time. Business credit scoring models look at business credit card usage, business credit history, payment history, and other similar factors, factoring them all into your business credit profile.
Why is it important to keep business finances separate from personal finances?
From a tax standpoint, you need to keep personal and business finances separate so you can track your business income and report it to the IRS. Small business owners also want to maintain separation to protect their personal assets against potential business liabilities.
If you don't do a good job of maintaining that separation, a court could decide that your business isn't a legal business entity, separate from you, in which case you would be held personally liable for your company's debts and other obligations.
¹BILL Divvy Card is issued by Cross River Bank, member FDIC. This is not a deposit product.
²Credit lines and the advertised range are not guaranteed and will be determined upon application approval.