If you’re an entrepreneur or business owner of any sort, I’m sure you’ve heard of business credit before. If you haven’t, business credit is built the same way you make personal credit. The only difference is that business credit is tied to your employer identification number.
Every business owner needs to establish business credit because it indicates whether or not your business is a trustworthy borrower. Business credit scores typically range from 1 to 100, with the higher the score meaning, the more creditworthy your business is.
You want to be able to receive loans, use credit, and more, so don’t drag your feet on building up your business credit. If you’re a new business owner or an established one, here are 5 ways to help you build business credit fast:
1. Set up a registered business entity.
Before you can start earning business credit, you need to incorporate your business to maintain legal and financial separation between you and your business. There are different types of structures like S-corps, LLCs, or LLPs, so do your research to choose the best entity for you.
2. Obtain a federal tax ID number.
Getting an employer identification number (EIN) allows the IRS to track businesses’ financial reports. Using an EIN is preferred for owners because you won’t have to use your social security number for business tax purposes.
3. Set up a business bank account.
Opening a bank account for your business is a crucial step to separating your business and personal expenses. Business credit bureaus have access to your bank reports so they can use your business’ bank account to report information on your business credit report.
4. Work with vendors/suppliers who report to agencies.
You want to be rewarded for good credit habits so ensure that you’re working with lenders and suppliers who report to credit bureaus. There are three major business credit agencies—D&B, Experian, and Equifax.
5. Pay vendors early.
Pay on time, or even better, early! Paying off bills on time is sure to build your business credit score quickly.
Building a good business credit score can help you get higher credit approvals, better interest rates, and repayment terms on loans and lines of credit. Get started establishing or improving your business credit today!