Just as you have a personal credit score, your business has a credit score too.

Because your business credit rating is a reflection of your company’s financial history, lenders are interested in how high (or low) this number is. Lenders are interested in how capable you are of managing your company’s finances, including any previous lines of credit. This information is summed up in your business credit score.

In this article, we will cover what determines your business credit score. More, we will go through a step-by-step guide on how to build business credit to ensure that you pay the lowest possible premiums for financing.

What is a Business Credit Score?

We mentioned that your business has a credit score that operates in a similar way to your personal credit score. Your credit score is tied to your social security number (SSN), and your business credit score is tied to your Employer Identification Number (EIN).

The credit bureaus collect the information that becomes associated with your EIN. This information is analyzed by lenders when you apply for a line of credit, term loan, SBA loan, or other financing option.

The bureaus also track your business’s payments to vendors and payments (and pay-offs) on previous loans you’ve taken out.

The bureaus’ algorithms use this information to determine your business’ credit score. This score is a numeric value that ranges from 1-100.

The higher your score, the better. With a high score, you’ll have more financing options at better rates. This is because the lender interprets a high score as an indicator you are likely to repay your loans.

Personal Credit May Be Considered As Well

Many lenders will also check your personal credit score. There are multiple credit reporting agencies and even different credit models, such as the Vantage model.

Because of this, your personal credit score may vary across agencies and reporting systems.

The Benefits of a Good Business Credit Score: Why Is It Important?

Your business credit score determines how much you pay for financing.  If you have a high score, lenders are more likely to offer you competitive interest rates when you seek loans and other financing products.

There are many reasons why you might seek financing for your business. Short-term loans are available to help cover any “hiccups” or cash-flow issues arising from day-to-day operations.

Loans are available for things like working capital, equipment financing, and investment in the business itself. Other options include credit-card stacking.

How is Your Business Credit Score Calculated?

We’ve mentioned that credit bureaus gather information about your company’s financial history. Then they use a proprietary algorithm to calculate your business credit score.

Factors Influencing Your Credit Score

To help calculate your credit score, agencies collect information about your company via the financial companies with which you conduct business, as well as public records. These agencies look for information on the following:

  • Business and industry data: how big your business is, how long you’ve been in business, how risky (or not) the industry in which you operate is
  • Credit history: how long your business’ credit history is, how much of your credit is utilized, your history of on-time payments
  • Credit quality: This is sometimes referred to as credit “depth.” For example, two individuals may have the same credit score (say, 700) but their scores may vary considerably in quality. One may have paid off a car or made consistent payments on a mortgage, while the other only used their credit for eating out and renting Netflix movies.
  • Relevant, publicly-available information: any judgments, liens, or bankruptcy filings with which your business is associated

If you are just getting started, your business credit score might not be great.

Actions such as taking out loans and paying them back on time and not maxing out your lines of credit will increase your score.

Remember, time is a key aspect. As you stay in business, your credit score will naturally improve — not only are your relationships with financiers longer, you demonstrate that your company is stable over time.

Conversely, actions such as never utilizing credit, defaulting on your loans, filing for bankruptcy, or accruing liens against your business will negatively impact your credit score.

Building Up Your Business Credit Score in Six Steps

You’re probably familiar with building up your personal credit score. There are a lot of similarities between that and building up your business credit score, but there are some noteworthy differences as well.

In the following sections, we show you what you need to do to build or (or improve) your business credit score in seven steps.

how to build business credit

1. Register Your Business and Establish Your Business’ Presence

Since the length of your business’ history greatly impacts your business credit score, you will want to register legally as soon as possible to establish a presence.

When registering your business, you can choose from the following types of business structures:

  • Limited liability partnership (LLP): A legal partnership where individual partners aren’t responsible or liable for other partners’ misconduct.
  • Limited liability company (LLC): This type of incorporated business offers some protection against liability and separates your personal and business finances.
  • S-corporation: A closely-held corporation that pays income taxes at the individual, not corporate, tax levels.
  • C-corporation: Offers complete legal and financial separation between you and your business; they are standalone legal entities and are taxed accordingly.

Choosing the specific type that works best for you is outside the scope of this article. We recommend speaking with the appropriate advisors if you aren’t sure. The important thing is to register your business.

Services like IncFile and LegalZoom can handle the formation of your company for you and even take care of annual filings.

Register Your Address and Phone Number

Finally, you should also establish a business address and phone number. Have your business listed in various directories using this information.

Because this information is considered by credit reporting agencies, you will want to make sure that it is correct.

Furthermore, establishing a phone number is a start at developing your business’ credit history — your relationship with the phone company is something that will be considered.

2. Obtain an Employer Identification Number

Once you have registered your business and established its identity (including setting up a business address and phone number), you should apply for an EIN (Employer Identification Number) with the IRS.

In many cases, you could operate your business using your personal SSN, but if you want to establish a business credit history, you must have an EIN.

Your business credit score is tied to your EIN, a unique nine-digit number that the IRS assigns to registered business entities operating in the US.

Without an EIN, you will not be able to establish a business presence with the various credit reporting agencies/bureaus.

You can complete the EIN application process online. You will receive your EIN immediately upon completion of your application, and all validations are complete.

3. Open a Business Bank Account

One of the factors that credit bureaus consider when calculating your business credit score is the length of your credit history and the status of your bank accounts.

One way for you to establish this type of history is to open a business bank account.

You should use this account for all incoming funds (invoice payments, investments, and so on), as well as any and all expenses. These actions will help you establish your business history and to build your credit.

4. Apply to Business Credit Reporting Bureaus

Though the various business credit reporting bureaus will automatically gather as much information about you as possible, you should still create accounts with each agency so that you can monitor and manage your information if things get recorded incorrectly.

While your credit history and other activities are pulled from the source, you are welcome to update basic information (e.g., address and phone number, years in business, and the number of employees).

Apply for a DUNS Number

One of the most well-known credit bureaus handling business-related reporting is Dun & Bradstreet, whose Paydex score is frequently used by creditors and suppliers when evaluating the financial trustworthiness of a company.

To get a credit file started with Dun & Bradstreet, you should register for the Data Universal Number System (DUNS). You can register online. You will get a unique, nine-digit DUNS number via mail about 30 days afterward.

What is a Good Paydex Score?

A good Paydex score is 70-100. A score of 80 indicates that a business has paid its suppliers promptly according to the agreed-upon terms. A score of 70 indicates that payments are usually made within 15 days of the agreed-upon terms.

5. Pay Your Suppliers Promptly

Because your credit history is a reflection of how you handle your relationships with lenders, you’ll want to establish good relationships with your suppliers.

As you buy supplies from third-parties, you will be engaging in financial transactions that — if managed well — can help you improve your credit history.

Try to work with a variety of vendors, and make sure that all of your payments are on time!

6. Apply for a Business Credit Card

Most businesses need credit to keep the business going, and one way to get much-needed funds is to apply for a business credit card.

These are a great way to have a ready supply of funds for day-to-day expenses. Again, this is a way to establish a credit history and prove that you can work well with lenders.

5 Essential Tips For Building Your Business Credit Securely

Establishing your business’ credit history is important, but you’ll want to do this carefully. Going too fast and not doing your due diligence when working with your creditors can lead to a negative effect on your credit score.

Here are some things to keep in mind.

Accredited Lenders

Making sure that your lenders are accredited will help contribute to your business credit.

Most lenders fall into this category and are Business Credit Bureau members, but check your lending terms to be sure. If you don’t work with such a lender, your good behavior in making on-time payments may not be recognized.

Borrow Carefully

There’s a fine line between borrowing to build your business credit history and leveraging yourself to the point where you can’t meet your repayment obligations.

Do your calculations, make your projections, and allow yourself some room in your budget for unexpected shortfalls.

Not making even a single payment can wipe out months of progress when it comes to building your credit history.

Monitor Your Credit Consistently

The best thing that you can do is to get set up with some type of continuous monitoring since small errors on your credit report can have big impacts.

But, if that’s not something you want to do, you can still pull your credit reports and review them regularly. If you find any issues, report and get them fixed as soon as possible.

Proactive Cashflow Management

Always manage your cash flow with your business credit in mind.

Managing cash flow is a two-way street. While cash flow issues are a good reason to see out credit, you should also consider your cash flow as it relates to making payments on your loans.

Will you have enough cash when your credit payments are due? If not, consider some financial changes to your business’ practices.

Pay Early

Pay on time, or early whenever possible. Having a lengthy credit history is important, but sometimes just having a line of credit is helpful. When you pay early, you’re likely saving yourself money in interest.

You will also free up credit, and because credit utilization (that is, how much credit you have vs. how much you’ve used) is important, freeing up funds will improve your credit score.


Here is a list of resources that will help you establish a business credit:

What If I Have a Low Business Credit Score and Need Financing Now?

Having bad credit doesn’t mean that there are no financing options available to you.

What it typically means, however, is that your loans will come with higher interest rates. This is true also for collateral-based loans, such as those that use real estate or equipment as collateral.

That said, there are financing options for you while you are building up your credit. These options include invoice factoring and merchant cash advances.

Invoice Factoring: Finance Based on Your Customers’ Credit

If you sell B2B or B2G (business-to-government) on 30-, 60-, or 90-day terms, and you have a cash flow problem, you may opt for an invoice factoring service.

Invoice factoring — sometimes called AR financing — relies mainly on your average monthly revenue and your customer’s credit score.

Merchant Cash Advance: Revenue-Based Financing

Approval for a merchant cash advance relies primarily on your recent monthly revenue. Typical approvals are for between 70% – 120% of your average monthly revenue over the past 3-4 months.

Equipment Financing

Equipment financing is possible for individuals with credit scores at 580 or above, no recent bankruptcies, and no charge-offs.

There are some sources for equipment financing that will consider personal credit scores as low as in the 400s. Typically this requires a 24% – 40% downpayment. Disqualifiers include open child support, open bankruptcy or a history of auto charge-off or repossession.


Having access to affordable business credit is important, especially when it comes to making sure that you can carry out day-to-day operations, overcome cash flow obstacles, and have funds for growth and investment.

The key to affordable business credit is to have a rock-solid business credit score.

In this article, we showed you how to build business credit. Exercising discipline by following these simple steps will put you — and your small business — in a strong financial position. And you’ll have more growth options available to you.