entrepreneurship

How To Build Your Business Credit Score — To Get Loans & Low Interest Rates

Michelle Black

WealthFit Contributor

Being an entrepreneur is undoubtedly hard work. You wear many hats, and more often than not there’s not enough time in the day to get everything done. Yet busy or not, if you’ve been ignoring your credit—a measurement of your ability to pay back lenders based on your payment history—you’re making a huge mistake.

When you’re trying to build a successful business, the health of your credit reports and scores matters a lot—for both yourself and for your company.

If you haven’t been giving your credit the attention it deserves, don’t panic.

Here’s a simple plan you can use to build business credit and personal credit starting this month.

Business Credit Reports vs. Personal Credit Reports

Although personal credit and business credit may appear similar, there are significant differences that are critical to understand as an entrepreneur as you focus on building business credit.

  • There are three major consumer credit reporting agencies—Equifax, TransUnion, and Experian—and three major commercial credit reporting agencies—Equifax, Experian, and Dun & Bradstreet.
  • Your business credit reports and personal credit reports feature different information.
  • While your personal credit is connected to you by your Social Security number, your business credit history is connected to you by your Employer Identification Number (EIN) or your Tax ID number.
  • In general, the accounts on your personal and business credit reports don’t overlap.
  • However, certain business credit card accounts might show up on both your personal and business credit reports, depending on the card issuer’s policy.
  • Most personal credit scores, like FICO and VantageScore, range from 300 to 850.
  • Business credit scores have many different ranges, from Dun & Bradstreet’s PAYDEX Score of 0 to 100 to FICO’s SBSS of 0 to 300.

Why Credit Matters

You likely already know why your credit matters on a personal level: good credit can equal better approval odds, lower interest rates, better terms, and more money in your pocket at the end of the month.

Business credit matters for many of the same reasons.

The inability to access necessary funds may put your business at risk.

Even if you build good business credit, commercial lenders may want you to have some skin in the game, so don’t be surprised if they require a personal guarantee (agreeing that you'll personally pay for charges on the business credit card if your business can’t make payments) before approving your company for financing.

How to Build Business Credit

Next, you need a plan to build your personal and business credit reports.

The concept is largely the same, regardless of the credit report type.

So, if you know how to build personal credit, you should have a good idea of how to build business credit too.

Here’s a breakdown:

  • Check your credit reports and scores from the three personal and three business credit bureaus.

    Before you start trying to build business credit, you need to know where you stand. The only way you can find that out is to check your reports and scores for yourself.

Are you reports really blank or do they have some negative information on them you didn’t know about? Knowing the answers to these questions is important for the next step of your credit building plan.

  • Establish positive and separate accounts.

    To have good credit, you need to establish credit first. But how do you get a lender to be your credit guinea pig? It’s actually not that hard—if you know where to apply.

Open a separate bank account for your business. The bank will usually ask for your EIN number as well as LLC documents. It’s critical to NOT use your business account for any personal purchases. By doing this, you will protect your personal assets in the event that your business fails or a lawsuit.

On the personal side of things, a secured credit card or a credit builder loan can be a great place to start. Whether you’re a credit virgin or have gone through credit problems in the past, you have a good chance of qualifying for either of these products.

  • Manage your accounts the right way.

Establishing positive accounts is only half the battle. You have to manage your new accounts the right way or they could backfire.

Thankfully, this part isn’t hard to understand. Managing your accounts well comes down to two basic principles:

  1. Pay your bills early or on time—no exceptions.
  2. Pay off your full credit card balance each month (preferably before your statement is issued so a $0 balance is reported to the credit bureaus).

Opening a few positive accounts and managing them well is a great start toward building better credit for the future.

Monitoring Your Credit

The last step that’s often overlooked when building business credit is monitoring your credit reports.

No one else cares about your credit—both personal and business—as much as you do. That’s why you have to take on the job of checking your credit reports often to make sure they are accurate.

Mistakes on credit reports happen far too often. When they do, those mistakes can harm your scores.

If you don’t monitor your credit reports and blow the whistle when something goes wrong, no one is going to do this for you.

Ideally, you should review all of your credit reports each month.

If this seems like too much, make a commitment to check your reports quarterly. You always ramp up your efforts down the road.

Be Honest with Yourself

It takes time and consistency to build good business and personal credit. You can’t open a new credit card account today and expect to have a perfect credit score tomorrow.

Still, building business credit isn’t rocket science. If you open a few positive accounts, pay them on time, and keep your credit card balances paid off each month, you’re already well on your way to credit success.

Be smart, be patient, and be consistent.

Those are the three key ingredients you need to take you from a credit newbie to a credit rockstar both in your personal life and in your business.

Share

Written By

Michelle Black

Michelle Black is a credit expert with over 16 years of experience in the industry and a freelance writer.

Read more about Michelle

RELATED TRAINING

 in 

ENTREPRENEURSHIP

article
11 Startup Ideas + How to Create Your Own

Learn how to come up with a killer idea for your first (or next) startup — plus check out these 11 awesome ideas you can model or replicate.

11 Startup Ideas + How to Create Your Own

Cash Lambert

Read Now
podcast
Internet Marketing, BIG Tech & The Future

In this forward thinking episode, Rich Schefren reveals the trends he's seen in the internet marketing arena, the actions he's taken to dominate online marketing, and the mission he's on to protect digital marketers and online entrepreneurs from the hidden agendas of BIG Tech Companies.

Internet Marketing, BIG Tech & The Future

Communicate, Sell, Win

Communicate, Sell, Win

How To Win Clients, Influence Employees, and Grow Your Business Through Effective Communication

Rene Kamstra

Watch Now
podcast
Side Hustles: Amplify Your Earning Power

In a life changing episode, Chief Side Hustler, Nick Loper introduces us to odd jobs that can put more money in your pocket and shows us how side hustles can lead to a life filled with financial independence and time freedom.

Side Hustles: Amplify Your Earning Power

podcast
How To Decide On (& Manage) Opportunities

Developing his listeners into excellent conscious leaders, Mike Handcock join’s Dustin on the show and teaches us how to focus on what we’re doing right and live the life we want by following the four G’s: Get, Groom, Grow, and Go For The Gold.

How To Decide On (& Manage) Opportunities

podcast
Secret Service, Corporate Drug Busts & The Money Train

From a secret service proposition to servicing entrepreneurs worldwide, join Dustin as he sits down with the dynamic Landi Jack as she reveals the secrets behind building a successful business leaders, getting leads, and developing relationships.

Secret Service, Corporate Drug Busts & The Money Train

podcast
How Saying Less Can Get You More

With his infectious and exhilarating energy, Brant Pinvidic gives us the inside scoop on reality television in Hollywood and entertains us using his infamous 3-minute rule! Unleashing the very business secrets that made him the most sought after C-level consultant in Hollywood and beyond, Brant shocks the business world by saying less to get a little more of out his business.

How Saying Less Can Get You More

article
How to Write a Food Truck Business Plan [Template Included]

Starting a food truck? Learn how to write a business plan that will get you funding, co-founders, and more! Use our template to get started ...

How to Write a Food Truck Business Plan [Template Included]

Nathan Wade

Read Now
article
Business Valuation: How Much is Your Business Worth?

Learn how to value any small business using this simple formula that applies a business’s EBITDA to it’s industry multiple.

Business Valuation: How Much is Your Business Worth?

Nathan Wade

Read Now
Personal Branding

Personal Branding

How To Create a Brand That Opens Big Doors, Attracts True Fans, and Makes Selling Easy

Michelle Villalobos

Watch Now
Product Branding

Product Branding

How To Create a Product Everyone Knows, Likes, Trusts … and Buys From

Rick Cesari

Watch Now
Credit Secrets for Entrepreneurs

Credit Secrets for Entrepreneurs

How To Use Business & Personal Credit To Launch Your Startup

Gerri Detweiler

Watch Now
podcast
Feeling Invincible, Marketing Martha Stewart & Dropping 76 Pounds!

Once Sayan Sarkar finally quit his full-time job, his side hustle business took off and generated 10x the amount of money he was making at his office job. He shares tips and tricks to how he was able to make this happen.

Feeling Invincible, Marketing Martha Stewart & Dropping 76 Pounds!

podcast
Born To Sell, Tripling Revenue & the Silver Tsunami

Are you investing in home care marketing? In this episode, The Hurricane explains why this industry is worth your hard-earned money.

Born To Sell, Tripling Revenue & the Silver Tsunami

Joint Venture Marketing

Joint Venture Marketing

How To Boost Your Sales Through Strategic, Low-Cost Marketing Partnerships

Ridgely Goldsborough

Watch Now
podcast
Conquering Cancer, Making Movies & Selling Businesses

This Cancerpreneur didn’t let the bad news of illness get in the way of his entrepreneurial spirit and positive mindset.

Conquering Cancer, Making Movies & Selling Businesses

Free PR

Free PR

The Hustler's Guide To Capturing Media Attention & Getting Eyeballs on Your Brand

Nicole Dunn

Watch Now
article
Do You Have What It Takes To Be An Entrepreneur?

In her new book “Women with Money,” Jean Chatzky gives us the top 5 traits of successful entrepreneurs. [Excerpt]

Do You Have What It Takes To Be An Entrepreneur?

Jean Chatzky

Read Now
Idea To Income

Idea To Income

How To Start a Company and Turn Your Entrepreneurial Dreams into Reality

Didi Wong

Watch Now
Start Your Own Precious Metals Business

Start Your Own Precious Metals Business

How To Flip Gold, Silver, Platinum, & Diamonds for Profit

Matt Wallace

Watch Now
article
How to Fund Your Business with Government Grants

Who doesn't want cash from their favorite Uncle Sam? Here's how you can find grants and fund your business with free government money.

How to Fund Your Business with Government Grants

Ian Chandler

Read Now
article
How Much Do You REALLY Need to Start a Business? The Answer is Less Than You Think.

Think starting a business takes TONS of money? It doesn’t have to. Here’s how you can build your empire without breaking the bank.

How Much Do You REALLY Need to Start a Business? The Answer is Less Than You Think.

Jon Westenberg

Read Now
article
Bootstrap Your Startup & Kickstart Your Success

Launching a startup without investors may seem like a one-way ticket to failure—but it’s one of the best ways to kickstart your business.

Bootstrap Your Startup & Kickstart Your Success

Ian Chandler

Read Now
article
How to Lead Employees to Greatness: Your (Hormonal) Strategy for Success

Consider and stimulate (the right) hormones for your team. Embrace leadership tactics that foster healthy hormonal teams.

How to Lead Employees to Greatness: Your (Hormonal) Strategy for Success

Jill Huettich

Read Now