7 Steps to Grow Your Business Credit Score Fast

Business credit is a crucial factor for any entrepreneur who wants to succeed in the competitive market. Having a good business credit score can help you get better terms and rates from lenders, suppliers, and vendors. It can also increase your chances of securing financing, contracts, and partnerships. But how do you grow your business credit score fast and effectively? Here are some tips to help you out.

Key Takeaways

Establish your business entity and identity to separate your personal and business finances.

Get a business credit card and use it responsibly to start building your business credit history.

Apply for a business line of credit or loan to finance your business needs and boost your credit score.

Pay your bills on time and in full to show lenders that you are trustworthy and responsible.

Monitor your business credit report regularly to check for errors, fraud, or identity theft.

Increase your credit limit and diversify your credit mix to lower your credit utilization ratio and show lenders that you can handle various forms of debt.

Build relationships with suppliers and vendors who report to the credit bureaus to establish a positive trade reference.

1. Establish your business entity and identity.

The first step to building business credit is to separate your personal and business finances. This means creating a legal business entity, such as a corporation or LLC, and obtaining a federal tax identification number (EIN). You also need to open a business bank account and a dedicated phone line for your business. These steps will help you establish your business identity and credibility.

2. Get a business credit card and use it responsibly.

A business credit card is one of the easiest ways to start building your business credit history. You can apply for a secured or unsecured card, depending on your personal credit score and income. Once you get a card, use it for your business expenses and pay off the balance in full every month. This will show lenders that you are a reliable borrower and boost your credit score.

3. Apply for a business line of credit or loan.

Another way to grow your business credit score is to apply for a business line of credit or loan from a bank or online lender. A line of credit gives you access to a flexible amount of money that you can use as needed, while a loan provides you with a lump sum that you have to repay over time. Both options can help you finance your business operations, projects, and growth. However, make sure you only borrow what you can afford to pay back and avoid defaulting on your payments.

4. Pay your bills on time and in full.

One of the most important factors that affect your business credit score is your payment history. Paying your bills on time and in full shows lenders that you are trustworthy and responsible with your finances. It also helps you avoid late fees, penalties, and negative marks on your credit report. To ensure timely payments, you can set up automatic payments or reminders for your bills.

5. Monitor your business credit report regularly.

Your business credit report is a record of your business credit activity and history. It contains information such as your business name, address, EIN, credit accounts, balances, payment history, inquiries, and public records. You can get your business credit report from the three major business credit bureaus: Dun & Bradstreet, Experian, and Equifax. You should monitor your report regularly to check for errors, fraud, or identity theft. If you find any mistakes, you should dispute them as soon as possible.

6. Increase your credit limit and diversify your credit mix.

Another way to improve your business credit score is to increase your credit limit and diversify your credit mix. A higher credit limit means that you have more available credit to use for your business needs. It also lowers your credit utilization ratio, which is the percentage of your available credit that you use. A lower ratio indicates that you are not overusing your credit and can manage it well.

Diversifying your credit mix means that you have different types of credit accounts, such as trade lines, leases, loans, and cards. Having a diverse credit mix shows lenders that you can handle various forms of debt and repayment terms.

7. Build relationships with suppliers and vendors who report to the credit bureaus.

Finally, you can grow your business credit score by building relationships with suppliers and vendors who report to the credit bureaus. Suppliers and vendors are businesses that provide you with goods or services on credit terms, such as net 30 or net 60 days. By paying them on time or early, you can establish a positive trade reference that will boost your credit score.

However, not all suppliers and vendors report to the credit bureaus, so you need to ask them if they do before working with them. You can also request them to report your payment history if they don’t already do so.

Tips

Start building your business credit as soon as possible, even if you don’t need it right away.

Keep your personal and business finances separate and avoid using your personal credit for your business needs.

Use your business credit card for small and regular purchases and pay off the balance in full every month.

Pay all your bills on time and in full, or even early if possible.

Monitor your business credit report regularly and dispute any errors or inaccuracies.

Increase your credit limit and diversify your credit mix by adding different types of credit accounts.

Build relationships with suppliers and vendors who report to the credit bureaus and pay them on time or early.

How to Grow Business Credit: A Statistical Report

Business credit is a way to evaluate the financial strength of a company. A strong business credit score can help you secure better terms on business loans, get lower rates on business insurance and negotiate more favorable terms with suppliers. But how can you grow your business credit and improve your financial reputation? Here are some statistics and tips based on the latest research and data.

The Importance of Business Credit

According to a survey by Nav, a platform that connects small businesses with financing options, 45% of small business owners did not know they had a business credit score, and 82% did not know how to interpret their score. This lack of awareness can have serious consequences for their ability to access capital and grow their businesses.

Business credit scores are calculated by three major business credit bureaus: Dun & Bradstreet, Experian and Equifax. They use different models and scales to measure the creditworthiness of a business, based on factors such as payment history, credit utilization, company size, industry risk and public records. A higher score indicates a lower risk of defaulting on debt obligations.

A good business credit score can have many benefits for a small business owner. For example, according to Nav, businesses with excellent business credit scores are 41% more likely to be approved for a loan than those with poor scores. Additionally, businesses with excellent scores can save an average of $15,000 per year in interest payments compared to those with poor scores.

How to Build Business Credit

Building business credit is not a one-time event, but a continuous process that requires planning and discipline. Here are some steps you can take to grow your business credit over time:

Register your business entity. This will help you separate your personal and business finances, and protect your personal assets from liability. You will also need to get an employer identification number (EIN) from the IRS, which will serve as your business tax ID.

Apply for a business DUNS number. This is a unique nine-digit number that identifies your business and allows you to establish a credit profile with Dun & Bradstreet, one of the major business credit bureaus. You can request a DUNS number for free on Dun & Bradstreet’s website.

Open a business bank account and a business credit card. These will help you create a financial history for your business and demonstrate your ability to manage cash flow and debt. Make sure you choose a bank and a card issuer that report to the business credit bureaus.

Open trade lines with your suppliers. Trade lines are agreements between you and your vendors or suppliers that allow you to buy goods or services on credit and pay them later. By opening trade lines with vendors that report to the business credit bureaus, you can build your payment history and show that you are a reliable customer.

Pay your bills on time or early. Your payment history is one of the most important factors in your business credit score. Paying your bills on time or early will boost your score and show that you are trustworthy and responsible. According to Dun & Bradstreet, paying 30 days early can increase your score by 10 points, while paying 90 days late can decrease it by 100 points.

Monitor your business credit reports and scores. You should regularly check your business credit reports and scores from the three major bureaus to make sure they are accurate and up to date. You can dispute any errors or inaccuracies that you find with the bureaus or the creditors. You can also use online tools like Nav or Fundera to track your scores and get personalized tips on how to improve them.

Business credit is an essential asset for any small business owner who wants to access financing, save money and grow their business. By following the steps outlined above, you can build your business credit over time and enjoy the benefits of having a strong financial reputation.

Frequently Asked Questions

Q: What is the difference between personal and business credit?
A: Personal credit is based on your individual financial behavior, such as how much debt you have, how often you pay your bills, and how long you have had credit accounts. Business credit is based on your business’s financial behavior, such as how much revenue you generate, how often you pay your suppliers, and how long you have been in business.

Q: Why is business credit important?
A: Business credit is important because it affects your ability to access capital, negotiate terms, and grow your business. Having a good business credit score can help you get lower interest rates, longer repayment periods, higher credit limits, and more favorable contracts from lenders, suppliers, and vendors. It can also help you attract investors, partners, and customers.

Q: How can I check my business credit score?
A: You can check your business credit score by requesting a free or paid report from the three major business credit bureaus: Dun & Bradstreet, Experian, and Equifax. You can also use online platforms or apps that provide business credit monitoring and analysis.

Q: How long does it take to build business credit?
A: It depends on several factors, such as how often you use your credit accounts, how quickly you pay your bills, and how diverse your credit mix is. Generally, it can take anywhere from a few months to a few years to build a solid business credit history and score.

Q: How can I improve my business credit score if it is low or bad?
A: If your business credit score is low or bad, you can improve it by following the steps mentioned above. You can also work with a credit repair company or a business credit coach who can help you fix errors, remove negative items, and optimize your credit profile.

References:

https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_20170331.pdf

https://www.sba.gov/blog/how-build-business-credit-your-startup

https://www.nav.com/blog/how-to-build-business-credit-23875/

https://www.forbes.com/sites/allbusiness/2019/03/06/10-ways-to-build-business-credit-for-your-startup/?sh=6c9f0f0a2a1b