Credit Compass

The Ultimate Guide to Building Business Credit

Building strong business credit is essential for securing financing, getting better terms from suppliers, and protecting your personal assets. Follow this step-by-step guide to establish and grow a powerful credit profile for your company.

Step 1: Lay the Foundation
Before you can build business credit, your business needs to be seen as a legitimate, separate entity by lenders and credit bureaus.
  • Incorporate Your Business: Form an LLC or Corporation. Sole proprietorships and partnerships link credit directly to you personally.
  • Get an Employer Identification Number (EIN): This is your business's social security number. Get it for free from the IRS.
  • Open a Business Bank Account: All business income and expenses must flow through this account. Do not commingle personal and business funds.
  • Establish a Business Address & Phone Number: Use a commercial address (not a P.O. Box) and a dedicated business phone line.
Step 2: Get on the Credit Bureaus' Radar
Unlike personal credit, you often have to take proactive steps to create your business credit file.
  • Get a D-U-N-S Number: This is a unique nine-digit identifier for your business from Dun & Bradstreet, the main business credit bureau. It's free.
  • Understand the Main Bureaus: The three major business credit bureaus are Dun & Bradstreet, Experian Business, and Equifax Small Business.
  • Check Your Initial Files: Once you have a D-U-N-S number, check with all three bureaus to see if a file has been created for you.
Step 3: Start Building with Vendor & Trade Credit
The easiest way to start building your credit history is with companies that offer "trade credit" or "vendor credit".
  • Find "Net-30" Accounts: These are vendors who give you 30 days to pay for a purchase. Find suppliers (e.g., for office supplies, printing) that report payments to business credit bureaus.
  • Make Small Purchases: Buy things you actually need for your business.
  • Pay Early: PAYDEX scores from Dun & Bradstreet heavily reward early payments. Paying 15-20 days before the due date can significantly boost your score.
  • Ask if They Report: Always confirm with a new vendor if they report your payment history to any of the major business credit bureaus.
Step 4: Graduate to Revolving Credit & Loans
Once you have a history of on-time payments with vendors, you can apply for more traditional financing.
  • Apply for a Business Credit Card: Use it for small, regular purchases and pay the balance in full each month. Ensure it's a card that reports to business bureaus, not just your personal credit.
  • Secure a Business Line of Credit: This gives you access to a pool of funds you can draw from as needed. It shows lenders you can manage revolving debt.
  • Consider a Small Business Loan: Successfully paying off an installment loan is a powerful indicator of creditworthiness.
Step 5: Monitor and Maintain Your Credit
Building business credit is an ongoing process. Protect your hard work by staying vigilant.
  • Regularly Review Your Business Credit Reports: Check for errors, inaccuracies, and fraudulent activity. Dispute any issues immediately.
  • Keep Utilization Low: Just like personal credit, keep the balances on your business credit cards and lines of credit low relative to their limits (ideally below 30%).
  • Maintain Financial Health: Lenders look at more than just credit reports. Keep clean financial records, manage cash flow effectively, and maintain profitability.
  • Separate Personal and Business Finances: This protects your personal assets and is crucial for maintaining the "corporate veil" that shields you from business liabilities.