How to Build Commercial Credit for Your Business

How to Build Commercial Credit for Your Business

How to Build Commercial Credit for Your Business

It takes a lot of hard work to build a successful business. Branding, product or service development, marketing, and good customer service can all be key components to your company’s success.

But these aren’t the only things that matter when you’re trying to grow a healthy business. Good commercial credit can also be a powerful tool you can use to help launch your company and expand.

What Is Commercial Credit?

Commercial credit is also known as “business credit” or “corporate credit”. Just as individuals have personal credit scores and reports, businesses also have business credit scores and reports. The three main commercial credit agencies are Dun & Bradstreet, Experian and Equifax. Two of the three main commercial credit scores range from 0-100. 

As a small business owner, the lines between your personal life and your business can often be blurred. You’ve probably invested a significant amount of your time, energy, and possibly even your finances to help get your business dream off the ground.

When it comes to your banking and credit, however, there should be a clear line of demarcation between your business and your personal finances.

Commercial Banking

One of the first steps to establishing a business which appears credible in the eyes of financial institutions and lenders is to open a separate business bank account in your company’s legal name. (If you haven’t set up your business as a separate legal entity with the IRS yet, you’ll need to circle back and complete this step first.)

Once your business has a commercial bank account, you should run all of your business income and expenses through it. Keeping business and personal credit separated is essential for accounting purposes. It can also be helpful for business lending and credit purposes in the future.

Types of Commercial Credit

After you’ve created a separate legal entity for your business and opened a business bank account in your company’s legal name, you may be ready to start building commercial credit. This process can be a lot easier if you know where to start and how to find lenders and vendors who are more likely to approve your application.   

Here are a few tips that might help:

  • Consider starting with a business credit card. Strong personal credit can be a big asset here since commercial card issuers will check your personal credit before approving your business for a new account. If you have poor personal credit, don’t worry. You may still be able to qualify for a secured business credit card and use it to help your company start establishing commercial credit of its own.   
  • Open vendor accounts. Net-30 accounts with vendors can be another effective way to establish business credit. Whether you need office supplies, tools, shipping boxes, or other supplies for your company, there may be a vendor that will help you build business credit simply by opening and using an account. As long as the vendor reports to the commercial credit agencies, you can order supplies your business already needs, pay for them later, and build some solid commercial credit at the same time.
  • Always pay on time. Better yet, you should aim to make the payments on your business credit obligations early. The new accounts you open to help establish commercial credit will only help your business credit scores if they show an on-time (or early) payment history. Some business credit scoring models, like the Dun & Bradstreet PAYDEX Score, are based 100% on your payment history.

You can find commercial credit cards, lenders, and vendors that match your credit profile using a free Nav account.

Is There a Difference Between Business Credit and Personal Credit?

There is absolutely a difference between business and personal credit. Assuming you’ve established personal accounts in the past, like credit cards and loans, you most likely have a credit report with each of the consumer credit reporting agencies:

  • Equifax
  • TransUnion
  • Experian

If you’ve established separate accounts in your company’s name (and assuming those lenders report information to the commercial credit bureaus), your company may have a credit report with one or more of the commercial reporting agencies as well:

Your personal credit reports and business credit reports are separate from each other. Personal accounts won’t show up on your business credit reports. It’s crucial to monitor your commercial credit reports. Commercial credit accounts typically won’t show up on your consumer credit reports either, though there are a few exceptions to this rule. Understanding how to report to business credit bureaus is crucial to building your business up to be qualified for financing.

Not Paying as Agreed

When your business falls behind on payments, there’s a chance a business account might show up on your personal credit. The reason you could personally be on the hook for a business account in the event your company doesn’t pay is because of a promise known as a personal guarantee.

Many commercial lenders and credit card issuers will require you to sign a personal guarantee whenever you take out commercial loans or open credit cards for your business. A personal guarantee says that you, the business owner, agree to be held personally responsible for a commercial debt in the event your company doesn’t pay as agreed.

Lenders and business credit card issuers ask for personal guarantees as a way to reduce the risk of loaning your company money and not getting repaid. If you sign a personal guarantee and things go wrong, not only can you be held personally liable for the debt, your consumer credit scores might take a hit as well.

Small Business Credit Cards

Most small business credit card issuers do not report on-time, regular account activity to the consumer credit bureaus. It’s important to have business tradelines in your business credit file. Instead, those accounts typically only show up on your business credit reports (depending upon who the card issuer reports data to each month).

Yet there are a few business credit card issuers who break this mold. Business card issuers that currently report all activity account to the commercial credit bureaus include:

  • Capital One
  • Discover

Learn more: which credit cards can help you build business credit

When a business credit card shows up on your personal credit, it will affect your personal credit scores, depending on several factors. This, of course, is true of most accounts which appear on your personal credit reports. How a business credit card account affects your personal credit always comes down to how the account is managed.

If a business credit card shows up on your personal reports, be aware that it’s twice as important to manage the account properly. Any credit mistakes on the account could hurt you two times – both with your commercial credit scores and your personal scores. One common factor that hurts commercial credit scores are UCC filings

Free Commercial Credit Report

Hopefully you already know that you have the right to claim a free copy of your three personal credit reports once every 12 months from Equifax, TransUnion and Experian. In fact, you’ve had this right for over a decade and a half, since the Fair and Accurate Credit Transactions Act was passed, amending the Fair Credit Reporting Act in 2003.

To claim your free annual consumer credit reports, simply visit

Unfortunately, there’s no federal law that gives you the right to claim free commercial credit reports for your business. But that doesn’t mean finding a free commercial credit report is impossible.

You can check your personal and business credit for free by setting up an account with Nav. In fact, Nav is the only place currently where you can see your personal and business credit side by side and free of charge.

Financial Stress Score

When it comes to commercial credit scores, it’s important to understand that your business doesn’t have just one score. There are many commercial credit scores that financial institutions use to predict the risk of lending money to your company.  One such commercial credit score is known as the Financial Stress Score by Dun & Bradstreet.

All credit scores are designed to predict something. Personal FICO Scores, for example, are designed to predict the likelihood that you will become 90 days late on any credit obligation within the next 24 months.

The Financial Stress Score predicts the likelihood that your business will cease operations within the next 12 months and potentially default on its outstanding debts. This score ranges from 1,001 to 1,875. Lower scores mean that the risk of business failure is higher.

As mentioned, your business has many other credit scores as well. Some of the most common commercial credit scores used by lenders are as follows:

  • The Dun & Bradstreet PAYDEX Score
  • The Intelliscore Plus from Experian
  • FICO LiquidCredit Small Business Scoring Service (SBSS)

Learn where to find your Dun & Bradstreet rating

The Bottom Line

The condition of your commercial credit can have a big influence over your company’s ability to qualify for business loans and secure working capital. Commercial credit can also play a role in whether your business can qualify for a real estate lease, lines of credit, and other types of financing.

Small business owners typically don’t have a lot of free time. Still, you can’t afford to let the job of establishing and monitoring your commercial credit slip through the cracks just because your schedule is busy.

A free account from Nav can, thankfully, make the process of monitoring your business and personal credit a lot easier to manage.

Related Commercial Business Credit Articles: 

This article was originally written on May 23, 2019 and updated on December 10, 2020.

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