How to open a business credit file

Even if you have great personal credit, as a new business owner you might not understand how to open a business credit file for your company. While personal and business credit have a lot of similarities, there are differences as well. It’s essential to know how to build solid business credit scores that can help your company thrive and grow.

If you don’t know where to start when it comes to establishing your business credit file, we’ve got you covered. Keep reading to learn how business credit works and the steps you need to take to open a business credit file for your company.

What Do You Need to Do to Open a Business Credit File?

Learning how to open a business credit file is a smart move that can help any small business owner succeed long term. Your creditworthiness as a business, entrepreneur, or startup shows vendors, suppliers, and lenders that you are trustworthy. 

Here are the five first steps you’ll need to take:

1. Create your business entity. You may need to register your business as a limited liability company (LLC), corporation, or other type of business before you can establish business credit. (You can have a business credit report as a sole proprietor, but you will have less liability protection). You’ll need to come up with a business name before creating the entity.
2. Get an employer identification number (EIN). An EIN is the tax identification number that the Federal Government uses to identify your business. This number allows you to distinguish your business finances from your Social Security Number to create a separate business.
3. Register with Dun & Bradstreet (D&B). D&B is one of the main business credit reporting agencies. First, check to see if your business is already registered with them. If not, apply for a free DUNS number or start business tradelines (like the up to two included with Nav Prime) to automatically create your DUNS number.
4. Get business tradelines. You’ll need to open accounts with other businesses that report to the major business credit bureaus. Check out Nav’s list of credit-building accounts that are easy to be approved for.
5. Open a business bank account. You’ll need at least two years of proven cash flow in a business bank account to qualify for many loans. Opening one right away can let you qualify for much-needed financial assistance like lines of credit or small business loans sooner.

A business’s credit can impact its ability to qualify for loans or credit cards. Good business credit can put you at the top of the application pile.

How Can I Build My Business Credit Fast?

Different lenders and service providers will review your business funding applications based on data from different commercial credit bureaus and different business credit scores. These commercial credit reports and scores will impact your ability to access capital or, sometimes services for your company.

It’s wise to establish a business credit file for your company with each of the major commercial credit reporting agencies – Experian, Equifax, and Dun & Bradstreet. Here’s a breakdown of how you can establish a business credit file with each of the three major business credit agencies.

Experian Business

Experian is a credit reporting powerhouse, both on the personal and business credit fronts. Business credit reports and scores from Experian are commonly used by lenders and suppliers who want to assess the risk of issuing credit to your company.

To establish a business credit file with Experian, the following steps are recommended:

1. Establish a separate legal business entity, like a corporation or LLC.
2. Apply for an Employer Identification Number (EIN) from the IRS.
3. Open a bank account in the legal name of your business.
4. Get a dedicated business phone number.
5. Apply for business credit in your company’s legal name (and make sure the creditor or vendor reports data to Experian Business).

You can also join  Nav or use Experian’s BizVerify service to see if you already have a business credit file created with Experian. (If you do have an Experian business credit file, it’s a good idea to confirm that the information on your business credit report is accurate).

Don’t have a business credit file with Experian yet? You can establish credit with a vendor or lender who reports data to that credit bureau.

Experian won’t give you free access to your business credit report. Instead, the bureau charges a fee to check your credit. However, you can check your Experian business credit summary using Nav at no charge, as well as get comprehensive and relevant business credit data that our lenders care about with Nav Prime.

Equifax Business Credit

Establishing a credit file with Equifax Business is quite similar to the process required by Experian. Once your business is set up credibly, you need to open accounts with creditors or vendors that report data to Equifax Business.

If your goal is to establish a business credit file with Equifax, you should search for card issuers, lenders, or vendors who report data to that credit bureau. When in doubt, you can always call the company and ask them which business credit bureaus they report to before you fill out an application for a new account.

Apply for a DUNS Number

Opening a business credit file with Dun & Bradstreet is a little different. Unlike Experian and Equifax where you can establish a credit file simply by opening a business credit account, you may need to apply for a free D-U-N-S number with D&B, if your business doesn’t already have one.

Here are three steps to establish a business credit file with Dun & Bradstreet:

1. Check with Dun & Bradstreet to see if your business is already registered for a D-U-N-S number.
2. If you don’t find your business on the D&B website, apply for a free D-U-N-S number to register your business. (It may take up to 30 days to receive your D-U-N-S number) or start a business tradeline that reports to D&B to have the number created automatically.
3. Apply for business credit in your company’s legal name (and make sure the creditor or vendor reports data to Dun & Bradstreet).

Business credit cards can be a great tool to help you establish a business credit file with the different commercial reporting agencies. Here’s a guide showing several corporate credit cards and the credit bureaus these credit card issuers report to each month. You might consider opening accounts with vendors who report to the business credit bureaus as well.

Build Business Credit In 30 Days

You shouldn’t expect to go from zero business credit history to excellent business credit within a few short weeks. It takes time to build a solid business credit file that can open doors to better interest rates and higher loan approvals.

Nonetheless, you can start making progress toward your business credit goals now. In fact, it’s possible to start building business credit in as little as 30 days.

Here are six steps you can use to help build a business credit file in 30 days:

1. Review your business and personal credit reports. Lenders will review this information when you apply for a loan, so you should check your reports in advance. If you discover errors on any of your reports, dispute them with the appropriate credit reporting bureaus. Learn more about UCC Filings and Business Credit Scores.
2. Make your business credible in the eyes of lenders. This means you’ll need to set up a separate legal entity for your company, like an LLC or corporation. You should also open a checking account in your company’s legal name. Finally, establish a separate mailing address, phone number, and website for your business to help your company appear legitimate when you apply for financing.  
3. Establish accounts with vendors that report to the commercial credit bureaus. You can always ask vendors if they report data to the major credit bureaus (and to which bureaus they report) before you apply for a new account.
4. Open a business credit card. See below for tips on how to open the right small business credit card for your company.
5. Pay your bills early. There’s no faster way to damage your business credit scores than making late payments on your credit obligations. If you pay on time or early, however, you’ll typically be rewarded with higher business scores. Learn more about how to report to business credit bureaus.
6. Keep monitoring your credit. Use Nav Prime to establish the habit of reviewing your credit reports often, ideally once a month. When you keep an eye on your reports you’ll be more attuned to your business’ credit health. You’ll also be able to react quickly if problems ever appear on your business credit file, such as identity theft or credit reporting errors.

You might be pleasantly surprised by how much progress you can make just taking the six steps above. Most business owners aren’t checking their business credit, much less trying to build it. If you consistently follow the steps above, you should start seeing results.

How Do I Open a Small Business Credit Card?

A small business credit card can be a great tool for your company. It can help you to keep your personal and business finances separate. Business credit cards are useful when you need to stretch your cash flow. When you add in the potential to earn valuable rewards and establish a business credit file for your company, deciding whether to open a small business credit card is practically a no-brainer.

Once you’ve decided that you’re ready to open a business credit card for your company, your next step is the find the right account. The following tips may help.

• Review your personal and business credit before applying. This will help you understand the current condition of your credit reports and scores. Keep in mind that both your personal credit report and personal credit score will come into play when you apply for a business card as well.
• Search for business credit card offers that fit your credit rating (poor, fair, good, or excellent). If you’re not sure which business credit cards you’re likely to qualify for, Nav can help you find the best offers based on your credit profile.
• Understand the significance of a personal guarantee. Most card issuers will require you, the business owner, to sign a personal guarantee when you open a new business credit card for your company. A personal guarantee signifies that you agree to be held personally responsible for your business’ credit card debt in the event your company doesn’t pay as agreed.
• Apply for the card with features and rewards your business could benefit from the most. Remember, it’s best not to apply for accounts you’re unlikely to qualify for based on your business and personal credit rating.

Do you currently have poor personal credit history? For now, a secured credit card might be a better fit for your company to help you establish a business credit file.

Once you’ve been approved for a small business credit card, congratulations! Now it’s time to manage the account so you get as much potential credit score benefit as possible.

Naturally, you will want to make every single payment on time. Better yet, try paying early as this could give you bonus points with certain commercial credit scoring models, like Dun & Bradstreet’s PAYDEX Score.

You should also aim to pay your balance off in full every month. In fact, this is a good rule of thumb to follow both for your business and personal credit cards.

Paying your full credit card balances each month will not only help you to save money on expensive interest fees, it could also help you to keep your credit utilization rate low. Certain business scoring models, like Experian’s Intelliscore Plus, consider your credit utilization rate (the lower, the better) when calculating your business credit scores.

How Do I Pull My Business Credit Report?

Establishing accounts is only half of the battle when you’re trying to build a strong business credit profile. You also need to get into the habit of checking your business credit reports and reviewing them for accuracy.

Checking your credit reports for errors is important, both personally and for your business. It’s easy to access free copies of your consumer credit reports and scores. Here’s a list of more than 150 places you can get your consumer credit scores for free. However, finding free copies of your business credit report isn’t as straightforward.

With your personal credit report, you have the legal right to claim a free annual credit report once every 12 months from each major credit reporting agency – Equifax, TransUnion, and Experian. Businesses don’t have this right. There also aren’t many places giving away commercial credit reports and scores free of charge.

The good news? You can access free business and personal credit summaries by joining Nav . Additionally, Nav Prime members get more full reports on their business credit health from the major credit bureaus.

Using Nav for your business credit reports will save you a lot of money. Most of the commercial credit bureaus will allow you to purchase your business credit report or sign up for a paid monthly service that includes access to your business credit file. However, the prices per bureau vary, but these services can be as high as $199 per month.

Slow and Steady Wins the Race

It can be tempting to treat the goal of building business credit like a race. Yet you should view the process more as a marathon and less as a sprint.

Not only do you need to establish credit accounts for your business, you need to manage those credit obligations properly. Some corporate credit scoring models base your business credit score 100% on your payment history. Even with scoring models that consider other factors, you can be sure that your business’ payment history on credit obligations will remain very influential over your credit scores.

As your business grows older, more profitable, and as you manage your credit obligations the right way, your business credit scores should improve over time. It won’t happen overnight, but if you manage your credit consistently you should be able to track the improvement in your commercial credit scores (provided there are no setbacks along the way).

Your goal with business credit is ultimately to know you can get affordable financing when you need it (and perhaps to save some money along the way). Following the steps outlined above in this guide can help give you a great head start toward business credit success.