How to establish your business credit fast

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How To Build Business Credit 

The key to building good business credit scores is to do business with companies that report payment history to business credit — and then to pay on time and keep debt levels manageable.

It really can be that simple. 

There are some nuances that can make the process of establishing business credit a little tricky for some entrepreneurs, however, so we’ll break it down here into step-by-step instructions. 

7 Steps to Establishing Business Credit

1. Build your business’s foundation
2. Get a D-U-N-S number & EIN
3. Get business tradelines that report
4. Open a business credit card or charge card
5. Pay on time or early
6. Get additional tradelines
7. Check and monitor your business credit reports and scores

1. Build your business's foundation

Establishing strong business credit starts with properly setting up your business. Lenders and vendors want to see that your business is legitimate and professional before extending credit.

A properly structured business foundation does more than just create a professional image—it provides the framework necessary for building business credit separate from your personal finances.

• Form a business entity, if possible.  Creating an LLC or corporation helps separate your personal and business finances and can be very helpful for building credit. We expand on that below.
  
• Register your business with your state. Most businesses should be officially registered with their state. If you form a business entity such as an LLC or S-Corp, you'll complete this step when you form your entity. Annual filings will likely be required to maintain your status.

If you operate as a sole proprietorship or independent contractor and have not registered your business, you can file a fictitious business name with your state. (This is sometimes referred to as a “DBA”.)

• File your business with local city/county agencies as appropriate. In addition to state registration, many localities require business licenses or permits. These requirements vary by location and industry, so check with your local government offices.
  
• Get an EIN from the IRS. An Employer Identification Number is the business equivalent of a Social Security number. While not required for all businesses, having one helps establish your business identity. We will talk more about this in the next section.
  
• Get a virtual address. Choose and consistently use a business address, which can be a virtual address service, or if that’s not feasible, a P.O. Box or even your home address if you're just getting started. Consistency is key for credit bureaus.
  
• Get a phone number for your business. Get a dedicated business phone number and, if possible, get it listed in directory assistance. You can use a service that provides a separate phone number for your cell phone such as Google Voice or GoDaddy Conversations. This adds legitimacy to your business profile.
  
• Get a business checking account. A dedicated business bank account helps separate your finances and is often required when applying for business credit. Many small business lenders require business bank statements when evaluating loan applications.

What if you want to operate as a sole proprietorship? You can still build business credit, but it’s far from ideal. There’s no legal separation between you and your business so you can’t get away from personal guarantees entirely. And some suppliers and lenders will only work with LLCs or corporations. Plus, if you start building business credit as a sole proprietorship but then later form a business entity, you may have to open new credit accounts to build credit under the new business name. 

Why is this step important? Many lenders and business credit bureaus gather information from public records like state filings. Maintaining consistent business information across all platforms helps create a professional image and establishes the foundation for your business credit profile.

Get Nav's checklist with 15 steps to make your business legit. 

 2. Get a D-U-N-S number and EIN

A D-U-N-S® number is your business identifier with the credit reporting agency Dun & Bradstreet (D&B). If your business doesn’t already have one (you can check whether it does for free), you will want to open an account that reports to D&B. Or you can request a free number directly from D&B. 

Creditsafe, Equifax and Experian all have separate identifiers (numbers to identify your business in their systems) but you don’t have to initiate this type of request with them. 

An EIN is the business equivalent of a Social Security number. The IRS requires some businesses to get an Employer Identification Number (EIN), but having one is not required to establish a business credit file. However, some business financial applications may require an EIN, and EINs may be reported to business credit reports. 

A D-U-N-S number ensures your business is visible to Dun & Bradstreet. An EIN can help match your business to its business credit profiles when lenders report account information to the bureaus. 

Why is this important? If you want EIN-only small business financing or small business loans without personal guarantees, you’ll need an EIN and a D-U-N-S number.

3. Get business tradelines that report

The most important part of any credit report is information about how you’ve paid your bills. Past payment history is used to help predict how likely your business is to pay on time in the future. That means you need accounts that will report to business credit bureaus, and not all do. You can start with two to three credit accounts with companies that report and add additional references as you continue to build your credit and grow your business. 

Net-30 accounts

Most businesses start with supplier and vendor credit. With these accounts, you can buy items your business needs, and pay for them later. Net-30 terms give you thirty days to pay your invoice, for example. 

Many net-30 accounts do not check personal credit, or require good personal credit scores. However, if your business is new, you may have to pay for several purchases upfront before you can access payment terms. 

Nav Prime

A great place to start your business credit journey is with Nav Prime. Yes, we recognize that we are recommending our product here. 

Nav Prime was designed for business owners to make it easier to build business credit. You don’t have to spend time trying to figure out what accounts to open. Nav will give you clear visibility into your business credit, along with alerts and actionable insights. 

With Nav Prime, you can get up to two active tradelines — one from your Nav Prime payment and another from regular use of the optional Nav Prime Card.* These tradelines are submitted to the major business credit bureaus to build your business credit history. 

Credit builder accounts

With credit builder accounts, you put money toward a savings account, and those payments are reported to major credit bureaus. Once you save the target amount, the savings account is yours to spend. (You can also cash most of these accounts early if needed, but you won’t get the full credit building effect.) 

Keep in mind that no lender or vendor is required to report to business credit; some do and some don’t. Some may report to one or two of the major commercial credit bureaus, but not others. So if your goal is to build business credit, you must choose accounts that report, and you need to monitor your credit reports with multiple credit bureaus to see what’s reporting. 

Why is this important? If you don’t have any accounts with payment history, your business credit report will likely have no business credit report or a report with a low credit score.

4. Open a business credit card or charge card

Opening a business credit card or charge card that reports to the major commercial credit reporting agencies is another great way to establish business credit. 

Credit cards let you finance purchases over time while credit cards must be paid in full. Both offer one of the safest ways to pay for purchases, and many of these cards offer perks and rewards.  

Business credit cards are typically reported as financial accounts to business credit bureaus or the Small Business Financial Exchange (SBFE). This puts them in a different category than supplier tradelines, and can complement those accounts. 

Most small business credit card issuers will use the owner’s personal credit scores and income from all sources to evaluate an application. That means they are available to startups as well as established businesses.

The Nav Prime Card* features no credit check and no personal guarantee, and it submits payment history to major business credit bureaus.

Gas credit cards can be another good option if your business needs to spend money on fuel. 

Why is this important? Business credit cards can be an important credit reference when paid on time. 

5. Get additional tradelines

It may take 30—60 days for new accounts to show up on your business credit reports. You can start with three tradelines, but as you build credit you may want to add more accounts to help boost your credit reports and credit scores. 

Sometimes in business credit you’ll hear these referred to as “tier 2” tradelines, which refers to tradelines that require stronger qualifications. In other words, most businesses won’t start out with these accounts, but as you build credit, you can expand 

You definitely should have at least one open business card if you qualify, but more than one can also be beneficial. In addition to another account reported on your credit reports, you’ll may be able to access a higher credit limit to increase cash flow. 

Be sure to use them carefully, though, so you don’t end up with debt you can’t pay and miss payments that would hurt your business credit scores. 

Why this matters: A robust credit report contains different types of accounts, paid on time over time. 

6. Pay on time or early

Payment history is the single most important factor for any type of credit scores, and especially so for business credit. On time payments are the most important way to build credit, and to earn the highest D&B Paydex® score you need to pay early.

Business credit reports use a term called, “Days Beyond Terms” (DBT) that describe how many days beyond the due date a payment was made. For example, if your terms with a vendor is “net-30,” and you pay on day 32, the account will be reported as 2 DBT. Yes, that means late payments can affect your business credit score if you pay just a day or two late. 

Pay on time or early if you can, and you may build your business credit score more quickly.

Why is this important? Payment history is the single most important factor for building business credit.

7. Check and monitor your credit

If you already signed up for Nav Prime to build an additional tradeline, you have likely checked your business credit from multiple business credit bureaus, updated each month when you log in. It’s the most affordable and comprehensive way to check, monitor and manage your business credit—as well as build a tradeline. 

Monitoring your business credit history on a regular basis can help you see whether you are making progress as well as spot mistakes. If you do find an error, be sure to file a dispute with the credit bureau reporting the mistake. 

Use Nav Prime to monitor your business credit reports and scores with multiple credit bureaus to track how your accounts are helping your credit scores, and if not, consider adding additional credit references.

Why is this important? Monitoring your business credit can help you adjust your approach and can alert you to problems so you can investigate further.

How Long Does It Take to Establish Business Credit?

It may take a few weeks, or even a month or more, before new accounts appear on your business credit reports. Once they do, you’ll need several months of on-time payments to establish a good business credit score.

It's a process that takes time. Whether you have a new business or one that is well-established,  if you take the steps above, you may be able to establish a good business credit rating in several months to a year. 

*DISCLAIMER: Nav Technologies, Inc. is a financial technology company and not a bank. Banking services provided by Thread Bank, Member FDIC. The Nav Visa® Business Debit Card and the Nav Prime Charge Card are issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa cards are accepted. See Cardholder Terms for additional details. FDIC insurance is available for funds on deposit through Thread Bank, Member FDIC. All other features of the Nav Prime membership are not associated with Thread Bank.