How to build business credit fast: 10 essential steps

Having strong business credit is critical for your business and its growth. Whether you’re looking to grow your team, expand your product offering, or get your cash flow back on track, it’s worth considering the power of financing to support the next stage of your business’s journey—and that’s where building business credit comes into play.

Lending options can help you invest in your business and improve your performance in the long run. However, gaining access to financing starts with proving your creditworthiness to lenders. One way to do that is with a strong business credit profile. In a nutshell, your business credit profile shows lenders how likely you are to meet repayment obligations in full and on time. If you haven’t yet established your business credit or if you want to make your existing score even stronger, follow these simple steps for how to build business credit and you’ll be on your way in no time.

What is business credit?

Business credit is your company’s history of debt repayments, including business loans, credit cards, and lines of credit. The stronger your business credit, the more reliable of a borrower you are, which means your business will be more likely to get approved for additional credit in the future. Solid business credit also helps you qualify for lower interest rates on small business loans, as well as more favorable repayment terms.

1. Set up your business structure

First things first: You need to incorporate your business. By definition, this means establishing your business as a legal business entity and separating your business assets from yourself, the owner. Three common types of business structures include C-corporations, S-corporations, and Limited Liability Companies (LLCs). You can decide which one is right for you based on the projected size of your business, your desire to issue stock, and how you want to handle your business and personal taxes, among other criteria.

(You can also establish business credit as a sole proprietor by registering a DBA name, but your personal and business finances will be connected.)

Incorporating will give your business added legitimacy, protect your personal assets in the event of a lawsuit against your company, and allow you to open a business banking account.

2. Apply for a federal tax ID number (EIN)

Once your business is incorporated, you can apply for an Employer Identification Number, or EIN. You can apply through the IRS, through the steps outlined on their website. Having an EIN is important in order to do things like hire employees, operate your business, make changes to the structure of your business, and yes, pay your taxes.

3. Open a business banking account

Keeping your business finances separate from your personal finances is important for a number of reasons. For one thing, you won’t have to spend hours combing through financial statements to separate business transactions from personal ones. Plus, it moves you one step closer to building business credit.

A business checking account alone isn’t going to build business credit. But opening one signals to the major credit bureaus—Dun & Bradstreet, Experian, and Equifax—that your business is ready for a credit profile. Plus, you can use this business checking account to make the payments that’ll directly impact your business credit.

If you don’t already have a business checking account, here are the most important factors to consider when choosing a business checking provider:

• Fee structure
• Balance requirements
• Interest
• Available financing options
• Digital user experience

Make sure to keep these things top of mind as you search for the right fit.

4. Get a line of credit or credit card

The process of how to build business credit from scratch is pretty simple: you need to get credit—then make payments in full and on time to show the business credit bureaus that you’re a responsible borrower. A great place to start is by opening a line of credit or business credit card.

A business line of credit can offer great flexibility and opportunity for small business owners. For example, here are some of the benefits your business can enjoy with a line of credit:

• No maintenance fees: Many credit lines come with no fees for opening, monthly maintenance, and closure. This means you only pay for what you borrow from your line.
• High credit limit: The available credit amount tends to be higher for a line of credit than a credit card. Your actual credit line will depend on a variety of factors, including your business’s creditworthiness.
• Access to cash: Having a line of credit means having access to actual cash that you can deposit into your business checking account. This can be especially helpful if you haven’t gone cashless in your business and need to make a cash payment to a vendor, for example.

A business credit card is another option for your company to establish and build credit. With a business credit card, you could enjoy:

• Rewards: The best business credit cards offer rewards for qualifying purchases, such as cash back, redeemable points or travel miles, or rotating rewards categories.
• Easy, secure payments: You can also add your business credit card to your mobile wallet for contactless payments in the store, or use your virtual card online for added security.
• Streamlined spending for your whole team: With a business credit card, you can issue additional cards to your employees so they can securely make business purchases without having to share card numbers. This also helps your company save time on expense reporting and reimbursements.

As long as your lender or credit card provider reports your payment activity to one or more of the major business credit bureaus, you can easily build business credit over time.

Bluevine Tip

Apply for credit with business-specific lenders and leasing companies. This will help continue to keep your personal and business finances separate, which could save you a lot of time if any financial or legal difficulty arises.

5. Secure tradelines that report to business credit bureaus

When you make credit arrangements with a lender or vendor who’ll report your payment activity to the business credit bureaus, this is called creating a tradeline on your business credit profile. Opening a business line of credit or credit card is one type of tradeline.

Another way to open a tradeline is to make net term arrangements with vendors. This involves a vendor providing you the option to buy goods or services now and pay later, typically within 30, 60, or 90 days. These agreements are called Net-30, Net-60, and Net-90.

Bluevine Tip

At first, you may need to personally guarantee loans until you’ve established business credit. Try to apply for or negotiate secured loans: loans that require you to post collateral. This type of loan will lower your lender’s perceived risk, allowing you access to more favorable terms.

6. Pay bills on time

Payments on a line of credit, credit card, or other financing sources aren’t the only metrics that credit bureaus track. They’ll also get payment history from your tradelines or other accounts. A great way to streamline the bill-paying process with everyone from your vendor to your utility companies is to set up automated online payments. Not only does this help ensure that you never have any late payments causing delinquency on your credit report, but it also helps take a little bit of stress off your shoulders by giving you one less thing to stay on top of.

On-time payments are especially important, because late payments can cause fees, increased interest rates, and impact your credit score in the long-run. The longer you wait to make your payment, the further your score will drop—so make sure to take precautions, like those mentioned above, to prevent missed payments.

7. Reduce your credit utilization ratio

You can also increase your credit score by decreasing your credit utilization ratio, or the amount of your credit you’re currently using, compared to your total available credit. For example, if you’ve drawn $1,000 from your line of credit, and have a credit limit of $10,000, you have a 10% credit utilization ratio.

The two ways to decrease this ratio—and therefore increase your credit score—is to decrease the use of your credit line or credit card, or increase your credit limit. If you know your credit utilization is going to go up, it might be a good idea to contact your bank and ask for a credit increase. As a rule of thumb, try to keep your credit utilization ratio under 30%.

8. Maintain consistent business information

Beyond maintaining a good score through things like low credit utilization and a good history of on-time payments, you should also make sure you’re making it easy for the credit bureaus to track your progress. Keeping your business information consistent across the credit bureaus will help keep your records accurate and build confidence in your business.

Contact the credit agencies whenever information, like your business address, changes, in order to stay up-to-date. If you need to change your business name, consider using a DBA name, while keeping the legal name of your business the same.

9. Avoid negative marks on your business credit report

In addition to doing all the positives to build your business credit, it’s critical to stay away from some negatives, as well. These list of “must-avoids” are called negative marks, and they include the following:

• Late payments/delinquencies: Paying your credit card bill late can result in a few different penalties, including late fees, an increase in APR, and more. The longer the delinquency goes, the more severe penalties can become, until the debt is moved to collections or a lawsuit is filed.
• High credit utilization rate: Having a high credit utilization rate can lower your business credit score, even if you pay the balance off in full each month. Remember, if you expect your expenses to be high, try to raise your credit limit to minimize the impact of this negative mark.
• Bankruptcies: Bankruptcy is often a last-effort response by a business that is not doing well. While it can be a credible solution if you have no other options, bankruptcy will stay on your credit report—and have a significant impact—for up to ten years.
• Tax liens: If you do not file or pay your business taxes, you may be subject to a tax lien, where the government can seize your business assets to pay off your tax debt. While this will not impact your credit score directly, it will be noted on your credit report, and could impact your ability to get more credit in the future.
• Judgments: If you are engaged in a lawsuit, particularly one that requires debt collection, this will be noted on your credit report. Similar to tax liens, it will not directly impact your score, but could hurt your chances of getting approved for credit in the future.
• Too many hard inquiries: Hard inquiries include things like requests to open new lines of credit, mortgages, and loans. These can drop your credit score a minimal amount, but those amounts can accumulate—and they can be grounds for denying future credit.

It’s crucial to avoid these negative marks, especially when your business is seeking credit. Collections, tax liens, and judgments can stay on your credit report for about seven years, while bankruptcies linger for up to ten.

10. Monitor your business credit reports

If you perform all of the above steps—set up credit and tradelines, consistently pay them on-time, and keep your information up to date with the credit bureaus—then your business credit will improve over time. However, it’s still important to keep a close eye on your business credit.

The business credit reporting bureaus each monitor your payment history and other financial data, but not all lenders and vendors report to every bureau. Review all three reports each quarter, and especially before you apply for a new loan or open a new tradeline. Catching any discrepancies during these regular reviews could help you secure more favorable terms.

Here’s what to check for:

• Accurate business information: Verify your company name, business structure, address, and business/industry type.
• Business credit scores and ratings: Each credit bureau uses its own scoring system, but your scores should be similarly strong. Significant differences may indicate unreported payments, outdated information, or that an important tradeline isn’t reporting to every bureau.
• Payment history: Ensure that all tradelines are listed and reflect your timely payments.
• Credit utilization: Check that the balances and credit limits reported on your credit profile align with what you’re actually using. High credit utilization ratios can bring down your scores, even if you make timely payments.
• Public records: Keep an eye on any liens, judgments, or bankruptcies that might appear on your credit profile. Some of these records can linger, impacting your credit score even after they’re resolved.
• Business financials (if reported): Confirm that your revenue, net worth, and any asset information reported by the credit bureaus is up to date.

If you find an error on your credit profile, contact the reporting bureau immediately. Submit a dispute, and include documentation such as invoices, bank statements, or vendor agreements with correct information. Be sure to follow up until the error is corrected.

Bluevine Tip

Consider using a credit-tracking service to easily manage your business credit scores, but be sure not to follow your business credit too closely—check in every quarter or when you’re preparing to apply for a loan or negotiate a vendor agreement.

Other strategies for building business credit fast

By following the ten steps above, you will have established the foundations of a strong business credit profile in under 30 days. However, it often takes many months or several years to achieve a strong business credit score. If you’re looking to build business credit faster so you can access more favorable loan or vendor terms, try the following strategies:

• Apply for a secured business credit card
• Explore small business loans from local credit unions
• Use a cosigner or guarantor

How Bluevine can support your credit building efforts

A strong business credit profile can help further legitimize your business and provide access to more growth opportunities. While established businesses have a variety of financing options, small business owners can struggle to access the business loans, business credit cards, and business lines of credit they need to grow.

With a Bluevine Line of Credit, you can apply online with no impact to your credit score,^BVSUP-00128 get a decision in as fast as five minutes, and enjoy instant funding on credit lines up to $250,000.^BVSUP-00009

Business credit FAQs