What Is a Business Credit Score-and How to Build One
Your business credit score affects your ability to get loans, credit cards and favorable terms with lenders and vendors. It reflects how reliably your business manages debt and financial obligations.
What Affects Your Score:
These are all similar to how a personal credit score is calculated and changed over time.
- Payment history: consistency and timeliness of payments
- Credit utilization: how much of your available credit is being used
- Length of credit history: older accounts generally help
- Public records: bankruptcies, liens and judgments can lower your score
- Number of inquiries: multiple credit checks in a short time may hurt your score
How to Build Business Credit:
- Form a legal business entity such as an LLC or corporation
- Learn how to form one HERE
- Get an Employer Identification Number (EIN) from the IRS
- Learn how to get one HERE
- Open a business bank account and keep personal and business finances separate
- Apply for a business credit card and use it responsibly
- Establish trade lines with vendors that report to credit bureaus
- Always pay bills on time, or early if possible
- Monitor your business credit reports regularly with agencies like Dun & Bradstreet, Experian Business or Equifax Business
Why It Matters:
- Easier access to small business loans and credit lines
- Better interest rates and repayment terms
- May influence vendor credit terms or leasing agreements
- Builds long-term financial credibility
- Strong personal relationships with local bankers can also improve your chances of getting both short-term and long-term financing, especially when your financials are borderline or timing is critical
Final Thought:
Building business credit takes time, but starting early and maintaining good habits will give your business more opportunities and stability in the future. Do not under estimate the importance a good relationship with your local business banker can have on your success.
