How to Establish and Build Business Credit (2024)

Like individuals, businesses have to establish a credit history in order to secure loans, attract partners, and get the best possible insurance rates. Strong business credit will play an important role as you start a new venture, expand an existing one, or recruit new vendors or suppliers with whom to partner. Take these steps to establish and build a solid credit rating for your company.

Get your personal credit history in order

New businesses don’t have an established financial history that lenders can use to verify their risk profile. As a result, loan eligibility for new ventures is often based on the owner’s personal credit score, reports the Small Business Administration.

If you’re just starting to establish your own personal credit, or looking to improve your credit score, the Consumer Financial Protection Bureau (CFPB) offers tips to help people with limited credit histories get started.

Register your business with an EIN

An EIN is an employer identification number. Once an EIN is assigned to your company, you will use it on your company tax returns, as well as for things like opening a business bank account, applying for licenses and permits, and applying for business credit. You can register for an EIN from the IRS.

Register your business for a DUNS number

Dun & Bradstreet is one of the three major business credit bureaus. It manages Data Universal Numbering System (DUNS) numbers, which act similarly to Social Security numbers for individuals. If you decide to apply for government contracts, as well as certain grants or loans, you will need to submit a DUNS number.

“Business credit bureaus can use your EIN or D-U-N-S number to identify your business’s activities and payments when reported, and business credit-scoring systems can use the data to generate scores,” wrote Intuit Credit Karma.

DUNS numbers are free. Apply on the Dun & Bradstreet website to get one for your business and start building a credit history.

[Read more: 6 Documents to Prepare for a Small Business Loan Application]

Open a business bank account

The next step is to establish your business as an independent entity separate from your personal financial history. To do this, open a bank account that will be used exclusively for company spending. This account should be in your company’s legal name and used with your company’s federal tax ID. It will help you create a track record of healthy spending habits tied to your business.

Apply for a business credit card

Building business credit starts by demonstrating your company’s ability to make payments in full and on time. “A business credit card can be one of the best tools for building business credit, provided you pay it off in full each month or keep the balance low (less than 30% of your available credit) and make regular, on-time payments,” wrote NerdWallet.

Read the fine print when you explore different credit card options for your business. Dun & Bradstreet notes that many credit cards will still hold the individual cardholder responsible for payments. As a result, these transactions may not boost your company’s credit score.

Pay vendors and suppliers early

It’s a little-known fact that paying your vendors early can help you get the highest possible credit score for your business. For instance, Dun & Bradstreet uses the PAYDEX score, a scale of 1 to 100, with 100 being the best possible credit score. Paying your vendors on time can get you a score of up to 80. But to get to 100 on the PAYDEX scale, businesses need to pay their vendors early. It may not be possible to pay early every month, but try to do so when cash flow allows — and at the very least, make sure bills are paid on time.

Monitor your credit

Check your business credit report a few times each year to make sure everything looks normal. Mistakes, such as missed payments, can happen — but more importantly, so can fraud. Fraudulent activity can crater your business credit, so check your credit score regularly to make sure nothing is amiss. You can get your company's credit report from Experian, Equifax, Dun & Bradstreet, or other smaller credit reporting services.

[Read more: Secured vs. Unsecured Business Loans: What You Should Know About Each]

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Published June 12, 2023