3. Start using business credit
Now that bureaus are keeping tabs on your business, it’s time to start getting and using business credit.
This can take several forms, depending on your needs. For example, most businesses can use at least one business credit card. Depending on your needs, you might choose to have more than one.
If you work closely with specific vendors, you might find that trade credit (also known as supplier financing or mercantile credit) works well for you. Trade credit gives you time to pay for purchases, and it often has low or even no interest.
And of course, classic business loans and business lines of credit provide another great way to use credit. Just keep in mind that we’re talking about actual business loans and lines of credit here. Other types of business financing, including merchant cash advances and invoice financing, won’t build your business credit (because they’re not technically credit products).
Reporting to credit bureaus
Not all lenders and vendors report to credit bureaus, and they may report to different bureaus if they do. Before you commit to business credit, you may want to ask your lender about its credit reporting policies to make sure it will give you the credit boost you want.
4. Keep up with your payments
After you’ve got business credit (whether it’s trade credit, loans, or credit cards), you need to make sure you pay it back on time. This might not be the most glamorous step of the credit-building process, but it’s probably the most important.
Remember, your business credit score tells lenders whether or not you reliably pay back credit. This is your chance to prove that you do. To effectively build your business credit, you need to make reliable, timely payments.
And keep in mind that building credit takes time. You need to consistently make payments over a long period of time.
We’re sure that was already your plan (because you’re a responsible borrower), but we really can’t emphasize this enough. If you fail to make payments or you default on your loans, you can expect big dings to your business credit score.
So do what you can to make your repayment foolproof. Schedule automatic payments if you can. Set reminders for yourself if you need to. Just keep those payments current.
5. Keep an eye on your credit report
As you do the above steps, you should naturally start to build strong business credit―no weird tricks necessary. But it’s a good idea to periodically check your business credit reports to make sure everything is accurate.
Yes, looking at your business credit report costs money. But since your business credit score can affect your ability to get financing and the cost of doing so, it’s a worthwhile investment.
When you look at your credit file, you want to make sure that everything is getting reported properly. Are your vendors and creditors reporting your timely payments as promised? Are there any errors that are dragging your score down?
You don’t need to obsessively check your business credit. Even an annual look will give you a lot of insight.
And with any luck, when you do check your business score, you’ll see that you’ve successfully built your business credit.
Don’t qualify for a business loan? Get a personal loan instead
FAQs about business credit
How can I build my business credit in 10 days?
There’s no way to build spectacular business credit in just 10 days, but you can get a start on your business credit by following the steps above.
For example, in 10 days, you can open a business bank account, file for a D-U-N-S number, open a business credit card, apply for a business line of credit, and more. You’ll need to keep using credit responsibly to build a strong business credit profile, but those steps can get you started.
Does my personal credit affect my business credit?
No, your personal credit score doesn’t directly influence your business credit score. None of the three business credit reporting agencies (Dun & Bradstreet, Experian, and Equifax) use your personal score to calculate your business credit score.
That being said, your personal credit may still affect your chances of getting business financing. Many, many lenders check your personal credit score as part of the loan approval process. So even though your personal credit won’t change your business credit, you should keep an eye on both scores.
How do I build business credit without using personal credit?
To build up your business credit, you’ll need to get business financing. But we’ll be blunt: many lenders use your personal credit score to decide whether or not to lend to you, so it can be hard to build business credit without using your personal credit score.
Your best bet will probably be using trade credit. Depending on your supplier, you may be able to get trade credit without a personal credit check.