Business credit: What it is and how to build it

Establishing and building your business credit may help unlock opportunities for your business. Without it, your financing, insurance and partnership options may be less than ideal.

Learn how business credit works, why it’s important and how to establish it.

Key takeaways

• Business credit is a measure of your business’s ability to pay for its loans, goods and services.
• Your business credit profile can impact funding eligibility, vendor relationships and insurance costs.
• Strong business credit can help you unlock funding when you need it, especially as you grow your company.
• Your personal credit rating is different from your business credit. But new business owners may need to rely on personal credit scores to help them establish business credit. 

Business credit is a measurement of how responsible your business is with loans and vendor relationships. Business credit is often expressed as a numerical score, known as a business credit score or rating.

Your business credit rating may affect your eligibility, terms and pricing for products and services. Entities you want to work with may check your business credit score to evaluate your financial responsibility and risk level. Any legally established business may build business credit. Like personal credit, building business credit takes time.

Business credit can be used for:

• Determining financing eligibility: Your business credit is a major factor in securing credit cards, loans and other sources of funding. Good business credit can help you access options with lower interest rates and favorable terms.
• Building professional partnerships: Organizations usually check your business credit to assess financial risks. The more secure your business credit is, the more confident organizations may feel when entering into a partnership with you.
• Securing investor relationships: Investors typically prefer to work with businesses with established credit. Good business credit may help attract investor relationships that can promote your business growth.
• Lowering insurance costs: Insurers may check your business credit when determining your rates and premiums. Established credit may help lower your costs.
• Securing supplier and vendor contracts: Suppliers and vendors want to work with clients who pay invoices on time. They may check your business credit to establish your contract terms—for example, how quickly you have to pay invoices and how long you’re contracted with them.

You can establish and build your business credit by working with companies that report your financial habits to the business credit bureaus.

If you’re just starting out, keep in mind that there’s no fast way to build business credit. But with time, patience and consistent habits, the following steps may help you access the financial benefits of positive credit.

In general, business credit bureaus need registered business information to establish your business credit profile. So be sure to register your business with your state.

If you’re a sole proprietor or independent contractor, consider filing a “doing business as” (DBA) name. Filing a DBA can help keep your business credit information separate from your personal credit profile.

An Employer Identification Number (EIN) is a nine-digit number issued by the IRS to businesses operating in the United States. It helps legitimize your business, separate your personal and company finances, identify tax liability and build business credit. You can apply for an EIN online for free.

A D-U-N-S® number is a nine-digit identifier provided by Dun & Bradstreet that can help establish your business’s identity and boost its credibility. Investors, lenders and other parties may leverage this number to gauge your company’s financial health and determine if they want to enter into a partnership with you. You may automatically get a D-U-N-S number if you set up a business tradeline. Otherwise, you can apply online for free.

A business credit card is often one of the quickest ways to build a business credit profile. The information credit card issuers report to the business credit bureaus can help establish your credit. And with responsible card use, you can send positive signals to the credit bureaus that may help improve your business credit over time.

Worried about your limited business credit history? Some card issuers may use personal credit information when determining eligibility. For example, Capital One reviews business card applications based on personal credit scores. So even new owners without an existing business credit score may get approved for a card. 

Some vendors may use your payment history to assess how likely you are to pay balances on time, so working with vendors that report your accounts to business credit bureaus may help build your business credit. It also diversifies the types of accounts on your business’s credit report, providing more information for lenders to base their decisions on.

Not all vendors report your accounts to business credit bureaus. If vendors you currently use don’t report, consider asking them to. Ideally, you should have at least two accounts that are reported to business credit bureaus.

Business credit bureaus often use your payment history to calculate your business credit scores. When you pay your accounts on time, you send a positive signal to the business credit bureaus, potentially increasing your credit scores. As your scores increase, you can access future funding and more favorable terms. This can come in particularly handy as you strive to grow and expand your business.

Consider checking your business credit reports from the major business credit bureaus—Dun & Bradstreet, Experian® and Equifax®—a few times a year. This allows you to track your progress and detect errors on reports. Errors may indicate fraudulent activity and may negatively impact your score. If you find an error on a report, you should report it to the issuing credit bureau to attempt to have it removed.

You can order your credit information from each bureau’s website. But keep in mind that there’s usually a fee involved in checking your business’s credit report.

Learn more about business credit with these frequently asked questions:

Many small business owners rely on business credit to access funding and prove their fiscal responsibility. It’s an important factor in many business relationships, including those with lenders, vendors and insurers. The path to building credit takes time but is key to your business’s future success.

Take the first step in building your business credit and explore Capital One business cards to see if any are right for you. And to view more business financing options, check out Capital One’s small business loans and lines of credit.