How To Build Your Business Credit Score

Whether you’re just starting your business or are finally diving into the world of business credit scores, there are several practical ways you can build your business credit.

While some of the best practices for building personal credit scores apply to business credit scores, the key difference is that business credit scores are public and play a huge part in lending and investment decisions, so having a good business credit score is a must for running a successful business.

We’re here to help you learn how to do just that.

What Is A Good Business Credit Score?

Business credit scores range from 0-100. According to the credit bureau Experian, a score of 75+ is good, while according to another key bureau, Dun & Bradstreet, a score of 80+ is considered good.

Both bureaus also have additional metrics they use to evaluate business credit, making understanding business credit quite. a bit more complicated than understanding personal credit. Read our full guide on business credit scores and how they work for more information.

Why You Need A Good Business Credit Score

A good business credit score allows you to:

• Improve your chances of getting a loan
• Unlock business credit cards with the lowest APRs and the highest reward rates
• Gain approval and funds from investors more easily
• Improve your business’s reputation and potentially win you more business (your business credit score is public information that anyone can look up)
• Get lower business insurance premiums
• Monitor your business’s overall financial health

What Factors Affect Your Business Credit Score?

Before we dive into building your business credit score, its important to understand what factors play a role in the actual score.

Common factors that affect your business credit score include:

• Length of time in business
• Age of credit history
• Credit Inquiries
• Payment history
• Outstanding debts via loans, credit cards, etc.
• Industry risk
• Business size

Note that this list is not exhaustive. Credit bureaus may end up using even more data points to calculate your credit score. For example, Experian claims to “examine more than 140 variables” when calculating a business’ credit score. But, these main factors are a good place to start.

How To Build Your Business Credit

Building your business credit score can take time, but there are some quick wins that can set you on the path toward a good business credit score quickly. Here are our top tips on how to successfully improve your business credit score.

Register For A D-U-N-S Number

If you’re looking for a quick win when it comes to establishing and building your business credit score, you’ll want to start by registering for a D-U-N-S number.

A D-U-N-S number is assigned by the big business credit bureau Dun & Bradstreet and serves as a business identifier. This is a great first step for establishing your business credit. This unique identifier is also used by investors and lenders to see your business’s profile to make lending and investment decisions.

To qualify for a D&B credit score, you need to register for a D-U-N-S number and have active trade lines with at least three vendors or suppliers. While it’s free to register for a D-U-N-S number, you will have to pay to purchase a Dun & Bradstreet business credit report to see your score.

Get An EIN

So, let’s say the credit agencies don’t have enough information on your business to provide an accurate score or complete credit report. No worries.

Registering for a federal employer identification number (EIN) through the IRS can quickly help establish your business credit. By registering your business for a few important designations, you’ll put your business on the map as far as credit agencies are concerned.

In addition to identifying your business to creditors, having an EIN also allows you to stop using your personal social security number for official documents, thus separating your personal credit from your business credit. Learn more about how to get an EIN.

Ditch The Sole Proprietor Business Structure

If your business is still a sole proprietorship, consider becoming an LLC or incorporating instead.

Forming your business as a limited liability company instead of a sole proprietorship has some important benefits, including establishing your business credit. As with registering for an EIN, restructuring your business as an LLC will help separate your personal and business credit because it differentiates your business as its own separate entity.

Open A Business Bank Account

Opening a business bank account with your business’s legal name and EIN is a great way to improve your business credit profile — and some of the best business bank accounts even include business score tools and features to help you track and manage your business credit score.

Apply For & Manage A Business Credit Card

Successfully managing payments on a business credit card is a great way to build up your business credit. To do this well, we recommend:

• Paying off your credit card in full every month
• Making one-time payments
• Keeping your credit card usage under 30% of your credit card limit

If you truly have no business credit or credit history, you may need to start with a secured card and work your way up to one of the best business credit cards. Be careful to check that your business credit card actually reports to the business credit bureaus, as not all do.

Set Up Trade Lines With Vendors

Setting up business trade lines with vendors or suppliers — i.e., “accounts payable” relationships — helps demonstrate your business’s ability to make payments on time.

Ann Martin, director of operations at CreditDonkey says:

Businesses looking to establish credit scores need to establish good credit with suppliers. Your relationship with your suppliers will essentially prove how good your business’ credit could be.”

Even if you don’t strictly need an accounts payable arrangement for your business, you can still set one up to help boost your credit score – you could, for example, set up a trade line with your office supplies or drinking water distributor.

Dun & Bradstreet also requires businesses to have at least three trade lines with vendors and four payments on file to apply for a D-U-N-S number, so this tip is a non-negotiable for successfully building business credit.

Fix Errors On Your Business Credit Report

A 2021 Consumer Reports study found that as many as 34% of consumers have caught at least one error on their credit report. Business owners aren’t immune from these errors either.

Once you have your business credit report in hand, go over it with a fine-tooth comb. If you spot any errors, be sure to reach out to the bureau in question. Erasing erroneous blemishes may give your score a quick boost.

Make Payments On Time

To get a perfect business credit score, you don’t just need to repay your debts on time but also your bills. This includes payments to:

• Suppliers
• Service providers
• Lenders
• Credit card issuers
• And any other entity to which you owe money

A strong history of on-time (or early) payments is one of the biggest factors in a good business credit score. Both online banks and good accounting software can help you automate your accounts payable and stay up-to-date on your various business payments.

Keep Your Debt Utilization Ratio Low

Even if you have multiple lines of credit or business credit caards, don’t max them out. This will help minimize your debt utilization ratio, which is the percentage of your available credit currently being used. Experts vary on the exact debt usage ratio for businesses, but somewhere between 15%-30%, or even less, is ideal.

Monitor Your Credit Profiles Regularly

Once you know what your business credit scores are, you can start to work on improving them. Making a regular routine of checking your business credit score is key to staying on top of any negative changes.

This also ensures that you can catch any errors quickly and take steps to improve your score as needed.

Don’t Make Your Business Look Risky

Avoid behaviors that hint at risk, such as closing any business-related accounts, and stay on the right side of the law in terms of business taxes, business licenses, insurance policies, etc. This is especially important if your business is a high-risk industry.

The key to a good business credit score (and to obtaining lending or investments with your credit score) is to make your business appear as sound and safe as possible, so any steps you can take to mitigate risk and improve your reputation of security and dependability is key.

Learn how to tell if you have a high-risk business.

How Long Does It Take To Build Business Credit?

If you are wondering how long it takes to build business credit, the answer varies from 3-6 months to 3-5 years. This lack of consistency makes it really difficult for businesses to know exactly how quickly they can expect their credit scores to improve.

One of the most clear timelines is that any new accounts your business opens take 30-60 days to appear on your business credit report. So, if you’re looking to improve your business credit score by opening a business bank, credit card, or line of credit, know that you’ll need several months at least of on-time payments and data to start seeing positive changes on your report (you may also see an initial drop for a new inquiry — don’t worry, this will drop with time).

While it’s easier said than done, try not to worry. Tackle the fast business credit-building tips below first, then trust that if you’re making on-time payments and maintaining a low debt utilization ratio, your business credit score will show all of your hard work eventually.

How Do You Build Business Credit Fast?

Some elements of building a business credit score can’t be rushed. Factors like time in business, a history of on-time payments, and lack of recent inquiries can only be helped by time.

The good news is that some tips for building a business credit score can be actioned right away and you can see an impact fairly quickly. We recommend starting with:

• Setting up trade lines with 1-3 vendors
• Registering for a D-U-N-S number
• Registering for an EIN
• Reporting any credit report errors

Each of these tips can be done fairly quickly and can help you quickly boost your business credit score. We hope this helps answer your questions about how to build a business credit score and gives you some practical tips and starting points to put into practice.