How to build business credit from scratch: a step-by-step plan

When a new business asks for funding, the owner's personal credit usually does most of the talking. Business credit changes that over time. It is a separate record of how your company pays its bills, and the stronger it gets, the more your business can stand on its own when it applies for credit, negotiates with suppliers or signs a lease.

Nobody starts with a business credit history. You build it. Here is how.

What business credit is, and how it differs from personal credit

Personal credit reports track you as an individual and are tied to your Social Security number. Business credit reports track your company and are tied to its legal name, address and identifiers. Several business credit bureaus keep these files, including Dun & Bradstreet, Experian and Equifax, and each builds its own profile from whatever payment information reaches it.

Two things are worth knowing up front. First, business credit files are generally built from what creditors and suppliers report, so a business that pays every bill on time but never has those payments reported can still look like a blank page. Second, many funders will still check your personal credit, especially while the business is young. Building business credit adds to your story; it does not replace looking after your personal score.

Step 1: Make the business a real, separate entity

Credit bureaus and funders need to see a business that exists apart from you.

• Register the business with your state, usually as an LLC or corporation. Our guide on checking a state business registration shows what that public record looks like.
• Get an EIN (Employer Identification Number). The IRS lets you apply online for free and issues the number right away if the application is approved.
• Use a business address and phone number that you'll keep for the long run.

Step 2: Keep your details identical everywhere

Bureaus match information to your file by name and address. If your business shows up as "Smith Plumbing LLC" in one place and "Smith Plumbing & Heating" at a different address in another, payments can land in the wrong file or create a second one.

Pick one exact legal name, one address and one phone number, and use them on your bank account, licenses, supplier accounts, website and online listings. Our guide to keeping business listings consistent walks through the online side.

Step 3: Open a business bank account

Run all business money through a dedicated business checking account. It separates your finances, and it is one of the first things funders review. Months of steady deposits and a balance that stays positive make an application far easier. See how to qualify for a business loan for what funders look for in bank statements.

Step 4: Get a D-U-N-S Number

Dun & Bradstreet identifies businesses by a nine-digit D-U-N-S Number, and some suppliers and customers ask for one. Dun & Bradstreet says there is no cost to request and receive a D-U-N-S Number. You may be offered paid add-ons along the way; they are optional.

Step 5: Open accounts that report your payments

This is the step that actually builds the file. You need creditors that send your payment history to the business bureaus.

• Supplier accounts with payment terms. Some vendors let you take goods today and pay within 30 days ("net-30"). Before you open one, ask directly: "Do you report payments to business credit bureaus, and which ones?" If the answer is no, the account helps your cash flow but not your credit file.
• A business credit card. Used for regular purchases and paid in full on time, a card can add steady positive history. Ask the issuer whether it reports to business bureaus. Our business credit cards guide covers how to choose one.
• Accounts you already need. Fuel cards, shipping accounts and equipment leases can report too. There's no need to open accounts you won't use.

Start with two or three accounts you can comfortably manage. More accounts are not better if they strain your cash.

Step 6: Pay on time, or early

Payment history is the heart of any business credit profile. Paying on or before the due date, every time, is what turns a thin file into a strong one.

Set up reminders or automatic payments, and keep a simple calendar of due dates. Our calendar is a handy place to see what's coming up in the economy that could affect your costs.

Step 7: Keep balances manageable

Running cards and credit lines near their limits can signal strain. Keeping balances well below your limits, and paying cards down each month, shows you use credit as a tool rather than a lifeline.

Step 8: Check your reports

Once accounts are reporting, look up your business files with the major bureaus a few times a year. Confirm the name, address and accounts are right, and dispute anything that isn't yours or is reported incorrectly.

Keep an eye on your personal credit too. The FTC notes that you can get your free, weekly credit report from AnnualCreditReport.com.

Step 9: Grow step by step

As your history builds, ask existing suppliers for higher limits, add another reporting account, or consider a small business line of credit. Using a modest line and repaying it on schedule adds a strong type of history to your file. If you're still very early, our guide to startup business loans explains what's realistic for newer companies.

Common mistakes to avoid

• Mixing personal and business spending. It muddies your records and weakens the separation you're building.
• Assuming every account reports. Many don't. Always ask.
• Paying for "instant business credit" packages. A credit file reflects real payment history; no one can legitimately create that for you overnight.
• Letting one late payment slide. Late payments can show up on your file. If you're short, call the supplier before the due date.
• Ignoring personal credit. Most young businesses still get judged on both.

Quick checklist

1. Register the business and get a free EIN.
2. Use one exact name, address and phone number everywhere.
3. Open a business bank account and run all business money through it.
4. Request a free D-U-N-S Number.
5. Open two or three accounts that report to business bureaus.
6. Pay every bill on time or early, and keep balances low.
7. Check your business and personal reports and fix errors.
8. Add credit gradually as your history grows.

Business credit takes patience, but every on-time payment moves it forward. For the wider picture, see where to get a business loan.

This guide is general information, not financial or legal advice.