Business credit refers to the creditworthiness of a business. Your personal credit history is tracked by bureaus like Experian, TransUnion and Equifax, with which you’re likely familiar. But when it comes to business credit, lenders often refer to Dun & Bradstreet (D&B), Experian Business and Equifax Business. To build business credit, you’ve got to know how to get on those bureaus’ radar.
Business credit can be built under various legal structures, including sole proprietorships, partnerships and corporations — as long as the business is recognized as a separate entity.
Getting both an Employer Identification Number (EIN) and a Data Universal Numbering System number (DUNS) are fast paths to creating and building a business credit file.
You get your EIN from the IRS, which is like a Social Security number for businesses. A business’ EIN is used for filing business taxes and serves as a business’s identification for business credit files. There are also no fees to apply for an EIN, and it’s typically required for partnerships, limited liability companies and corporations.
Getting a DUNS number is free, and it’s issued by Dun & Bradstreet, a credit bureau for business credit. By getting one, you’re directly registering your business with a business credit agency. Many business lenders and suppliers use Dun & Bradstreet to determine your creditworthiness, and it may also be required to apply for some government grants and loans.
To be clear, a business bank account isn’t necessary to run a business or build credit — but it can streamline the process. A business bank account can separate your personal and business assets, and you can use it to apply for business loans. An active business bank account provides a clear financial record that lenders and credit bureaus can use to evaluate your business’ creditworthiness.
Aside from building credit history, a business bank account draws a clear line between your personal funds and your business, creating a nice level of liability protection. It can also help you keep your bookkeeping organized and streamline tax filings. Also, having a business bank account can increase your approval odds when you apply for credit with that same institution — provided you keep the account in good standing.
Now that you have your EIN and DUNS numbers and a business bank account, you can start applying for business loans and credit with lenders that report payments to the credit bureaus. There are many types of business financing, including:
Whenever you take on new credit, be sure you can responsibly pay it on time. Payment history is a major factor in both personal and business credit scores.
Similar to personal credit scores, you’ll likely have a different credit report and score depending on where you look. Equifax’s Business credit score ranges from 101 to 992, Experian Business score is from 0 to 100, and Dun & Bradstreet Paydex score ranges from 1 to 100. For all these credit scoring models, the higher the number, the better.
Factors that can impact your business credit score include time in business, credit inquiries, credit utilization, negative marks and payment history. There’s also a lot of information that can be on your business credit reports, such as the number of employees, sales history, industry classification, payment history, account statutes, collection accounts and public records such as bankruptcies.
Build your best business credit profile
Building business credit doesn’t necessarily require having a good personal credit score — the scores aren’t intertwined. But having a good personal credit score can make it easier to get business financing when you’re first starting. Lenders may check your personal or business credit score (or both), so having good credit all the way around is advantageous.
If you have a new business, your eligibility for business loans will likely rely on your personal credit score, and a good rating is often considered above 670. A good business credit score is often considered 70 or above for the Experian and Dun models and above 550 for Equifax Business.
If you’re just starting, it can take six to 12 months to establish a good business credit score — very similar to personal credit building.
If you want to build business credit fast, registering your business with Dun & Bradstreet and getting that DUNS number is a good place to start. It’s not required to apply for a DUNS number with the agency, but it means you’re creating your business credit file without relying on creditors to report something that will create that credit file. In short, you’re jumping ahead of creditors and creating a credit file with one of the biggest business reporting agencies in the US.
Another fast way to build business credit is by applying for loans and credit with lenders that report payments to the major credit bureaus because you want that reporting action. It’s estimated that of more than 500,000 suppliers extending credit, only about 10,000 report to a business credit agency, according to the SBA. So, make sure to ask about a lender’s reporting practices.(3)
Aside from traditional borrowing methods, there are other ways to start building business credit fast.
Building business credit takes patience. You may not see results for a few months, but a better business credit score can open up borrowing opportunities and qualify your business for better interest rates and more favorable loan terms. Often, many new businesses start building business credit with business credit cards for flexible borrowing or small business loans to get off the ground.
Your business’ EIN is like its Social Security number, and that unique number is used to track your business’ credit history and identify it for tax purposes. If you apply for business credit using your business’ EIN, that typically means the credit is being reported to the business credit scoring models. If you use your Social Security number instead of your business’ EIN, that likely means the credit is being reported to your personal credit history.
Having good credit isn’t necessary to start a business. But if you want to take on loans, you may need good credit to secure that funding. If you don’t have any business credit or a business credit file at all, your first few funding sources are likely to rely on your personal credit score. SBA loans typically require personal credit scores around 620 to 680, whereas other business lenders may require good credit scores around 670 or higher.
It depends on where you go. SBA loans are known for taking a while to approve and deliver funds, and you may not get funds for 30 to 90 days, depending on the loan type. Online, no-doc business lenders tend to offer the fastest funding times, with some offering loan delivery as soon as the next business day.
Top apps like Self that build credit include Kikoff, Grow Credit, Chime Secured Credit Builder Card, Credit Strong and Cleo.
Top alternatives to Kikoff for easy credit-building include Self, Cleo, Grow Credit, Fizz and One Finance.
The Tomo credit building card is currently on a waitlist, meaning it’s not available right now. Compare features and other options here.
Kovo Credit Builder helps you build your credit history for around $10 per month and reports to four credit bureaus. Many competitors do not.
The best credit-building apps include Self Credit Builder, Step, Fizz, Cred.ai, Cleo, Grow Credit and Credit Karma Credit Builder.
Lexington Law is a credit repair company, but it carries a poor reputation.
Kikoff offers several credit-building products, including a secured card with no monthly fee, no interest charges and a low minimum deposit.
Prepaid credit cards are secured cards that work like debit cards to avoid APR and build credit. Top options include Step, Current, Varo and more.
Bright can help pay down credit card debt from multiple angles.
Cushion is an all-in-one banking app that helps you track your spending and build credit without interest charges. See if it could be right for you.
