How to Build Your Business Credit

Protecting and Building Your Business Credit

Establishing a solid business credit history is essential when you’re applying for a business loan. It can also open doors to partnerships and better deals on purchases.

While you may already have good habits when it comes to your personal credit, there’s more involved when it comes to effectively monitoring, updating and maintaining good business credit.

These tips can help you develop and manage this important part of your business.

Understand the business credit rating system

The three major organizations that monitor business credit — Experian, Equifax®, and Dun & Bradstreet — all offer slightly different perspectives on your company. Generally, suppliers look to Dun & Bradstreet for reports that emphasize how you interact with vendors. Lenders often leverage data from Experian and Equifax for guidance on a company’s creditworthiness; Equifax reports collect data from the collection of small business lenders known as the Small Business Finance Exchange, among other sources, while Experian collects information on your history with both vendors and lenders.

Keep in mind that while you have some control over who sees your personal credit score, your business credit report can be viewed by anyone for a fee. For example, companies you may want to work with can access your score before deciding to do business with you.

Building business credit

While individuals build their personal credit score any time they take out credit, you may have to be more proactive to register your business with credit bureaus. Start by getting a Data Universal Numbering System (D-U-N-S®) number, a 9-digit identifier that Dun & Bradstreet uses to start a business credit history. Apply for credit with lenders that supply data to these two agencies to build your Experian and Equifax reports. Be sure to apply for credit and put all company expenses in your business’s name. Open a business bank account to pay company bills and strive to keep business and personal finances separate at every turn so that you can build a strong credit history for your company.

Establish a strong track record

The key to a solid credit history starts with buying goods and paying your invoices promptly. You may also need to make sure the bureaus are aware of your best performance. For instance, while thousands of companies, including Home Depot, Staples, and UPS, do automatically report their B2B customers’ credit account payments to the credit bureaus, most business suppliers and vendors do not. Ask all your vendors if they report to the agencies; if they do not, politely ask them to do so. Experian’s website provides a template letter that helps you make a request.

If you think you need additional funds for your business, and feel confident you can make payments on time, applying for and repaying a modest-sized loan is another way to demonstrate your ability to manage debt. This payment history will reflect well on you when you are ready to borrow for a more significant investment in your business.

Correct report errors

Once your business starts building a credit report, check your profile to be sure it correctly states your length of time in business, how many employees you have and your Standard Industrial Classification (SIC) code. Read your report carefully and look for errors or outdated information that may be hurting your score, such as old unpaid bills or incorrectly recorded defaults. Check back about once a quarter to ensure that no bad information has crept into your report.

Each of the bureaus has a process for correcting inaccuracies or disputing information. Expect to provide an explanation for the error and documentation that backs your claim. In some cases, you may have to request the bureau open up an investigation to solve a problem. For example, if a supplier has erroneously claimed you were late in making payments, you may not be able to tell who made the complaint, as reporting agencies often keep that information hidden.

Maintain your score

Keeping your credit score high is a matter of good financial habits: Make your payments on time, keep your information up to date and keep balances on your accounts below the credit limit.

A high business credit score can give you a significant boost when you’re applying for a business loan or looking to build partnerships, so it’s worth the time and effort to keep that number up.
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