1. Register your business and get an EIN and D-U-N-S number.
Registering your business with the IRS allows you to generate an EIN (Employer Identification Number) — a federal tax ID that can be used to represent your business. You can use an EIN to apply for credit instead of using your Social Security number. You can apply online in a few minutes.
You can also apply for a D‑U‑N‑S Number. Created by Dun & Bradstreet, a D-U-N-S number is a nine-digit identifier for businesses. The number establishes your Live Business Identity file — the foundation of your business credit score. Registering for this number can be done online at the Dun & Bradstreet website.
2. Get a business bank account.
As soon as you start making or receiving payments for your business, you should open a business bank account. This can add credibility and legitimacy to your business. It helps you stay legally compliant and may help protect your personal funds. Also, it may make it easier to apply for a business credit card.
3. Establish credit lines with vendors.
Depending on the type of business you have, you may be able to open credit lines with vendors without a personal credit check. Vendors may offer “net terms” that allow you to defer payment for a set time period (such as 30 days). Making your payments on time can help establish and grow your business credit score, since vendors will report your payments to business credit agencies. As an example, supply stores like Lowe’s, Home Depot or Staples may offer credit to business owners.
A good
line of credit strategy is to start off small and make consistent, on-time payments. As your business credit history develops, you can boost your chances of being approved for higher business credit lines and loans.
4. Get a credit card that reports to business credit bureaus.
Using a personal credit card for business expenses isn’t ideal, so you should consider getting a business credit card. A business credit card can help keep your business expenses separate from your personal expenses and may even help build your business credit. Similar to personal credit reporting, a business credit card may report your payment activity to business credit reporting agencies like Dun & Bradstreet and the National Association of Credit Management (as well as consumer reporting agencies like Experian and Equifax). Note that not all business credit cards do this. If establishing your business credit is an important goal, make sure you apply for a card that helps build business credit, such as the Nav Prime Card.
5. Establish good cash flow and make timely payments.
To build good business credit, you need to manage your credit lines well and make payments on time. You should follow best accounting practices, avoid overextending yourself and do a cash flow analysis. If you miss payments or become delinquent, that negative activity may be reported to the various credit agencies and your credit health can take a hit.
→ Learn how to establish and build business credit