How to Open a Business Credit File and Build Credit History

BusinessCreditBureaus

By opening credit files at major business credit bureaus or having tradelines that report payment history, you can establish business credit. As you try to establish business credit with vendors and suppliers they will then access your business credit reports to determine whether your application gets approved.

How to Open

As a new business owner, your very first step to establishing business credit will be opening credit files at Dun & Bradstreet, Experian, and Equifax. Before you build business credit, you’ll have to register a legal business entity and apply for an EIN and a DUNS number that will both be linked to it.

Business Entity

A legal business entity is required to open a business credit file, and a sole proprietorship or DBA (doing business as) company will only get you so far. To remove all personal liability from doing business you’ll need a state-registered Limited liability Company (LLC) or a Corporation. When selecting either you’ll also ensure you are eligible for many different tax credits that are not available for sole proprietors.

Most small businesses can simply register an LLC while obtaining any industry-specific licenses they need to do business from their local state or municipal government. If you need to operate as a non-profit, or foresee future business expansion that includes having several branches or shareholders, then registering a C Corp or S Corp would be better.

SIC Codes

No matter if you choose an LLC or corporation, be sure to avoid high-risk SIC codes when registering your business. A low-risk SIC code with set you up to start building business credit quickly, whereas a high-risk code will cause you to require collateral assets to get business loans in the future.

EIN

Your EIN is a business Tax ID number issued by the Internal Revenue Services. that you can quickly apply for free on the IRS website, or by sending in your application via email or fax. You will need your EIN when opening a business credit file or a business bank account, as well as when filing your taxes.

Just like an SSN is used to gather credit data for personal credit reports an Employer Identification Number is an equivalent used to gather financial data for a business credit report.

DUNS Number

This nine-digit number is a unique business identifier linked to your Dun & Bradstreet business credit bureau file. While a applying for D-U-N-S number is not compulsory to conduct business, you’ll need it to generate the D&B Ratings which many vendors use to judge your creditworthiness.

Providing your DUNS on tradeline applications will allow your vendor to report your payment history. You can apply for a DUNS number for free on dnb.com, but you might have to wait up business 30 business days to receive it. Unfortunately, the only way to speed up the process is to pay extra for their 5-day express service.

Bank Account

While it’s not mandatory to have a bank account to open a business credit file, it’s will be needed once you move past net 30 accounts for new businesses. Many credit suppliers will require you to have a business bank account to apply, and it is no longer compulsory when applying for a business loan.

You can easily apply online for a free business checking account at many different banks, which have very low or no minimum deposit requirements. So if you want to easily build business credit by purchasing office supplies, just make sure you get your banking details in order.

Credit Bureaus

To start building business credit you’ll need open credit files at the major business credit bureaus at Dun & Bradstreet, Experian, and Equifax. Most bureaus will require you to use vendors and suppliers who report positive payments to add business financials to your credit profile.

Once you’ve created some credit history, potential business partners and lenders can then easily review your file when finalizing their decision to extend credit.

D&B

Dun & Bradstreet
Dun & Bradstreet

You can open a Dun & Bradstreet credit file fairly easily by applying for a DUNS number. They will also allow you to edit and update your business and financial data by paying $229 for a DUNSfile, which includes an expedited DUNS number approval. If you don’t want to pay, you’ll have to wait up to 30 business days to get your free duns number.

While waiting, you can still start building business credit by applying for Dun & Bradstreet tradelines. You’ll need at least three vendors reporting to D&B to receive your PAYDEX score, and other D&B ratings found in your DNB credit report.

Experian

Experian Small Business
Experian Small Business

As a small business owner with no credit history, you’ll need to find at least one tradeline that reports to Experian to have them open a credit file.

All company info inside your Experian business credit report is taken from third-party sourcing, so you cannot add anything to it yourself. Their business credit risk score is called Intelliscore Plus and is used by lenders to judge creditworthiness.

Equifax

Equifax Business
Equifax Business

Startup businesses will need to open tradelines with at least two vendors who report to Equifax to have them automatically generate a business credit file.

Then within 60 to 90 days, your Equifax credit report will start to populate with your business purchase history and you’ll be able to view your Payment Index and Business Risk Score.

FICO

Even without having an established business credit history, you can still receive a FICO Small Business Scoring Service score. This is because their LiquidCredit rating system is a combination of your business and personal credit scores. If you have good consumer credit then you may already have a FICO SBSS score before even having several business tradelines that get reported.

Next Steps

As you build your business credit file through net 30 vendor accounts be sure to manage your purchase history by paying your bills as early as possible.

Once you have 3-5 trade references that report to your payment history, you’ll need to start monitoring your credit scores and ensuring your business reports are factually accurate. By tracking your credit building progress at all the major business credit reporting agencies can process to apply for retail store cards and business credit cards.

Pay on Time

Nothing will build up your business credit faster than ensuring your bill are paid on time. Many credit scores like Equifax Payment Index and D&B PAYDEX will even reward you for paying early.

Another thing that every business credit score has in common, is that they will also penalize you for making payments even a few days late. If your vendor payments start going in default or collection, this will create a negative business credit file and absolutely destroy your credit scores.

If your scores fall industry averages you’ll find many lenders will outright refuse to offer you credit, and your existing tradelines and business credit card companies might even increase your interest rates. So, pay your bills as early as possible, and never, ever, pay them late.

Credit Monitoring

After opening business credit files and having made a few tradeline payments, it’s time to track your credit-building progress. By actively monitoring your business credit scores reports and scores you can see which tradelines are properly reporting.

If you find any discrepancies in your business credit history that might be hurting your credit rating, you can file a credit report dispute.

Building Credit

After 3-6 months of having 5-8 tradelines being reported on your business credit files, you can start applying for business store credit cards and gas cards. This will add an extra layer of credit reporting to your file, and get you to the point of being able to apply for business credit cards and loans.

When you obtain higher credit limits you can also use these cards to increase your monthly cash flow, such as buying supplies and equipment you need to do more business. As you add lending diversity to your business credit file you will set your business for future success, while increasing your company’s value in the eyes of potential partners and investors.

FAQ

Below you’ll find answers to our most frequently asked about opening business credit files and the fastest methods for doing so.

It is a business report card where all your company’s financial information and payment history, whether good or bad, are studiously recorded. Inside your business credit file is a collection of scores and ratings, as well as, financial stress indicators that suppliers, lenders, and potential partners use to decide if they want to do business with you.

Early payment history is marked like an A+ in business credit files, while late payments and those in default will show a failing grade. Business liens, legal judgments, and other financial woes will further be recorded in your business profile and available for all to see. If you have an incomplete credit file, a poorly graded or mostly empty file, it will also impact your company’s credibility. Vendors who offer net 30 accounts would be unlikely to approve your credit application while obtaining business loans would be incredibly difficult.

A Dun & Bradstreet credit profile can be open right away by applying for a D-U-N-S number and adding all relevant company information to your DUNSfile. Other major business credit bureaus like Experian, Equifax, and Creditsafe require several vendors who report payment history to open a business file. They will also take your company information from other public sources rather than let you edit it yourself.

The first step is to register an LLC, C corporation, or S corp that does not have a high-risk SIC code. Next, you’ll need to apply for an EIN from the IRS and fill out your business credit profile at Dun & Bradstreet, by registering for a DUNS number.

Then you’ll need to open a business checking account and establish a few new accounts. You can then start building business credit quickly by having 5-8 vendors who report to business credit bureaus, you start looking into which store cards, No PG business credit cards, and alternative lenders you can qualify for.