Establishing and building your business credit score is vital to your success as a small business owner. It enables you to separate personal and business finances so that your own personal assets are not at risk for business debt. With strong business credit, you can obtain lower interest rates and insurance premiums as well as quicker approval and more favorable terms for lines of credit and loans. Here are some tips on how to build and strengthen your business credit score.
Take the First Steps
To ensure that your business credit score remains separate from your personal finances, take the steps to establish your business identity. For instance, form a limited liability company or corporation. Obtain a federal employer identification number, or EIN, from the IRS, and a nine-digit DUNS number from Dun and Bradstreet. Using your legal business name, open a business phone line and a business bank account.
Obtain a Business Credit Card
Business credit cards often have more favorable rewards and benefits than personal credit cards. More importantly, payments are reported to the credit bureaus and can help build your business credit score. You can use your business credit card to help manage company cash flow as long as you avoid revolving a balance, which would compromise your credit score and result in high interest rates.
Negotiate With Vendors
When considering vendors, choose those that offer payment on terms, and request that they report your payments to the credit bureaus. Paying vendors on time is essential, and to boost your business credit score even more, pay them early.
Monitor Your Credit
Regularly monitor your business credit reports from the three major credit bureaus of Equifax, Experian, and Dun and Bradstreet. If you come across any errors, report them right away so that your business credit score will not be negatively impacted.