DIY: How to Build Business Credit

Handling your first business credit account correctly is the first step in building credit.

Build business credit by using the credit history of the business or by using your personal credit history and signing as a guarantor on initial loans. Building business credit requires you handle your initial accounts correctly to establish a positive credit history and good credit score. An excellent business credit score is 75 or greater on a scale from 0 to 100, according to "Entrepreneur" magazine. Personal credit scores range from 350 to 850. Once a good credit score and history is established, you are much more likely to be approved for additional credit lines with larger credit limits.

Instructions

1. Register your business with Dun & Bradstreet by visiting the website. Dun & Bradstreet gathers credit payment history from creditors and allows potential lenders to pull your business credit report as part of the lending process.

2. Make all payments on your current business accounts on time. Paying late may result in a negative report added to your credit file which will lower your credit score and make it harder to obtain new credit.

3. Keep your balances low on your business credit card accounts. Keeping a credit utilization ratio lower than 20 percent of your balance will offer the best credit score. This means if the business credit card has a credit limit of $10,000, keep your balance under $2,000 if possible.

4. Open new credit if you do not have any current business accounts. To establish a new business credit history, either open an account with an office supply store or get a secured loan from your bank or credit union. A secured loan will require you to put up money as collateral. Once you show you can handle the account properly, you will establish a credit score and be ready to apply for additional loans based on your business credit history.

Tips & Warnings

• Office supply stores are usually willing to offer new businesses credit without an established credit history.

References

• Building my Business Credit
• Financial Web: How To Establish Business Report At Credit Bureaus
• "Entrepreneur" Magazine: The ABCs of Business Credit

Resources

• Dunn and Bradstreet