How to Build Business Credit if You’re a New U.S. Immigrant

How to Build Business Credit if You’re a New U.S. Immigrant

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During a conversation with a business woman at a recent small business conference, I realized that starting a business in the U.S. is significantly different than starting one in other countries.

The business woman who I spoke with was from Canada and was asking for information on how to open a U.S. location for a business she was already operating in Canada. She was concerned about building business credit because she believed she had to have business credit to start a business in the U.S.

Fortunately, business credit is not a requirement to start a business and anyone who has legal status to work in the U.S. can start one. That said, business credit is important to build and monitor for any business owner because it can help you get better funding, lower your costs and protect your personal credit. There’s no better time to start building your business credit than the time you start your business.

Starting a business for a new U.S. immigrant includes the same steps for any U.S. citizen, however, building business and personal credit is a little different.

Personal credit plays a big role

To build business credit, personal credit is required. This may be very different for a U.S. immigrant who may be used to a system where personal and business credit are completely separate. Just like the business woman I spoke to from Canada, an immigrant may be under the false assumption that personal credit has nothing to do with business credit. But, in order to start building business credit, you’ll need to use your personal credit.

Unfortunately, as an immigrant, it is highly likely that a person has a significant disadvantage when it comes to personal credit in the U.S. Here’s why:

  1. It is likely that the credit bureaus do not have a credit profile on a new immigrant. Typically, a social security number is required to start a credit profile and new immigrants generally receive a social security number as part of their immigration application process, or shortly after they arrive in the U.S. What this means is that a new immigrant will have trouble building personal credit in the U.S. before they arrive in the country.
  1. It is more difficult to build credit when you’re first starting out. As a new immigrant with a new social security number, creditors may be wary of extending credit to you. It may take several applications for small credit cards/lines before you may be approved. Once approved for at least one account, the account has to be active for a period up to 6 months, depending on the credit bureau and scoring model, before a score can be calculated. It’s also important to remember that the account must be a positive account. After time, it will be easier to be approved for additional credit accounts. It also might be easier to start building credit by financing a vehicle. It is generally recommended to have at least one auto loan and a few credit cards on your credit profile to establish a strong credit foundation. This process can take several months.
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Building Business Credit

As you build your personal credit, you’ll need to focus on a few steps to set up your business and business credit.

Business credit is not necessary to start a business in the U.S. as it is in some countries. A person simply needs to file the required legal papers with the Secretary of State in the state where the business resides, apply for a local business license and get a U.S. employer identification number or EIN.

Business credit bureaus comb through public records, including secretary of state filings, for new business records. Eventually, the bureaus will find the filing for the new entity and a profile will be created for the business. This is helpful, but not the only thing that needs to be done.

Once a profile exists with the bureaus, it is important to make sure that the information the bureau has on your business is correct. Focus on business identification information such as address and type of business as well as making sure the number of employees and annual revenues are reported correctly.

Once you have a business credit profile, you can start working towards building your business credit and obtaining a business credit score. Start building your business credit by applying for business credit cards. There are three basic ways to do this:

  1. Open a gas card account under your business name.
  2. Obtain one of the basic business credit cards provided by major credit card issuers such as American Express or Capital One.
  3. Open business accounts with vendors such as Home Depot or Lowe’s.

As you continue to open accounts under your business name, they will begin to report to your business and your profile will become scoreable.

Building business credit as a new U.S. immigrant is not that much different than building business credit as a U.S. citizen. The real difference is with personal credit and making sure you take the right steps as soon as possible to start building your personal credit.

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About the Author — Caton is a founder and CXO of Nav, the first company allowing business owners to access their personal and business credit reports, scores, and alerts through a single account.

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