How to build your business credit score

Whether you have been a business owner for 20 years, or you are in your first year of business, it’s important to understand what a business credit score is and how you can build your business credit score.

Before jumping into how a business owner can start to establish their business credit, it’s important to understand the role your credit score plays in lending services.

Why your business credit score matters

Similar to your personal credit score, your business credit score can influence the credit or loan services you qualify for and the rates and terms that will be applied.

Better financing terms means lower interest rates. And when a financial institution sees that your business has a high credit score, it will only increase the likelihood of your loan request being approved.

It’s important to mention that a low business credit score wouldn’t be the only reason why a lender decides to not approve a loan request. It’s just one piece of the financial puzzle a banker looks at when evaluating a request.

Establishing business credit

There are multiple factors that play a role in determining your credit score. Growing your credit score won’t happen overnight, but there are three things you can do now to begin building your business credit.

1.  If you are a startup business the first step is to establish a business entity and get a free federal tax employer identification number (EIN) through the IRS. Establishing a business entity and incorporating your business will keep your personal and business credit scores separate.
2. Another important step to establishing a business credit score that is separate from your personal credit score is opening a business bank account. And keeping your business and personal expenses separate has many key advantages beyond building your business credit score.
   
3. Apply for a business credit card to help finance your business. When used responsibly and by making regular payment on time — or even early — you will begin to build your business’s credit score.

How to check your business credit score

Your business credit score can fall within a range between 0 and 100. And a score of 75 or higher is considered excellent. This is different than the range that is used for personal credit scores, which is 300 to 850.

There are three main business credit reporting agencies, Dun & Bradstreet, Experian, and Equifax. If you are interested in a free business credit report, look into Nav and CreditSignal.

You should monitor your business credit score at least once a year. Changes to your score can happen in a matter of a few months, and any changes — positive or negative — can impact how you are able to do business with your customers, suppliers and financial partners.