5 Ways to Build and Improve Your Business Credit

In the history of human kind, managing a business has never been a walk in the park. You can ask the guys who tried to start a company. The moment you have decided to take on this path, you must prepare yourself mentally, physically, and emotionally, and even your bank accounts to be clear. Because as an entrepreneur, you cannot skip the difficulties and bumps along the road of this journey. Especially to the first timers.  

In the world of business, the first thing to consider before building a company or any business in that matter is “Do you have funds?”. Your capital or funds determine how much you can do at this point of time. It’s good to have people to back you up called as investors – people who are willing to shell out money to achieve a certain amount of capital in exchange of a percentage share. However, there’s always a 50% chance of having none. This is where business credit comes in.

Business credit is a scoresheet indicating how well your company handles money. The higher the score, the better. A company with a good history of business credit plays a significant role once the same company is ready to take it to the next level. You can also gauge the reputation of the company by looking at the business credit score as it determines its likelihood to succeed - this could be by landing new investors or through business expansion.

Okay, so what if you do not want to expand and deal with investors? Do you really need a good business credit? Let’s dig in deeper. 

The answer is yes. Because somewhere along your business venture, you will encounter the need to get a loan from lending companies or banks and these institutions heavily rely on your business credit score. If you are a startup or a small business, learn how to build business credit designed for SME. Banks can also offer you more flexible payment terms, better interest rates, and convenient deals if you have an outstanding record to show. Like what was mentioned above, your scoresheet indicates how well your company handles money. If it has poor score streak, chances are banks will not permit you to lend money.  Now that we have that covered, next is how to help you build a business credit.

5 Secrets Revealed

1.       Establish a company – Legally declare a business entity. This way, once lending companies do a background research on your company, they would know that you have a legitimate one. It is essential to have a phone number that directly routes an inbound call to your company. Take in to consideration as well to be listed in your state’s directory to allow people contact you easily. A website is a helpful platform too as research is done online nowadays. Keep in mind that having a business entity with its own different business credit can come in handy in the future once you have decided to take a personal loan or even when a legal action takes place against your company.

     Other aspects to take into account are applying for a tax number and set up a business bank account. Your company’s tax number can be obtained at the Internal Revenue Service. Having a tax ID means being legally registered as a business entity and that your company is now obliged to pay taxes. Once you have your tax ID, you can now set up a business bank account. 

Your business bank account is a prerequisite to be eligible for a business loan. You can also deposit your company’s revenue here so do not skip this first step.

2      Register with credit bureaus – Not all banks and money lending companies report trade information to the rightful credit bureaus. Credit bureaus are institutions that monitor your business credit. It is important to  put all your business transactions into record as this will be used to determine your business credit. It is easier also to track your company’s credit performance once you have registered with credit bureaus. Banks and credit bureaus work side by side when approving business loans so make sure you do not miss this. Two of the most well trusted credit bureaus in the country are Equifax and Experian.     

3.     Pay on time – Building a good business credit is heavily based on handling your company’s money. Just like any other type of business transaction, it is vital to pay your suppliers, vendors, clients right and on time even if it means cutting back budgets and affecting your net income. Being a good payor indicates your company is good to deal with hence it projects a positive impact on your business credit. Be hands on in managing monetary matters as this helps you be on top of all your company’s expenditures and payments while keeping a good business track record. More than that, paying right and on time encourages other companies to do business with you. Stay away from any delinquencies at all costs.

4.    Dealing with vendors and suppliers – In line with being registered to credit bureaus, it is as important to ensure that your clients, vendors, and suppliers report your good credit behavior to credit bureaus. Again, this has an additional bearing in establishing a good credit line. Maintain a good relationship with your suppliers because your reputation as a company reflects on this. More importantly, it is good to have an eye for assessing which sellers and vendors are good to make business with because it takes two parties to make a good partnership work. Avoid companies and businesses that have bad or skeptical credit record as this may give adverse impact to your company and credit file. It is better to be safe than to be sorry.

5.  Business credit card – There are several kinds of business credit cards. Opening one allows you to purchase goods or services and conduct payment later on. It provides additional documentation to support your credentials once you apply for a business loan as it is an indication that you are a good payor. Obtaining a business credit card can be useful as well when the time comes for sudden payments, contingencies, or emergencies.

A simple tip that not everyone knows is to not close credit accounts. It is useful to keep that record intact as it shows your previous payment history and proves that you are a good payor. 

Now let us briefly go over how you can improve your business credit.


1.     In business, you have to be on top of everything. Part of the work is to monitor your business credit file. This way you can easily check if there are any disputes that has to be rectified or issues that must be addressed immediately. You can also check if your records in the credit bureaus are in place and reflected.  Aside from that, it is also a good opportunity for you to check if your vendors and suppliers are diligently reporting your business credit performance.  Knowing all this information allows you to immediately take necessary actions in order for you to increase your credit score. 

2.     Do not go near your credit line limit. Remember that you want to maintain a good track record for future purposes.  Good money management plays an important role here so learn to prioritize. Experts highly suggest to not use more than 30% of your credit limit. Keep your balances low for easier payment scheme while paying the balance on time will keep you maintain a good score.  

3.    Open more than one account from different trusted credit bureaus. This is a good way to see your credit performance from two different perspectives. In this way, you can review the accuracy of your credit file. It never hurt to have supporting documents and records to back you up and your company.

4.    Do not apply for loans or business credit cards too often. This might give an impression that your company’s financial capacity is always on the verge of depletion or frequently in need of financial support.   This can heavily affect your score card to decrease. Also, multiple loan application entail background investigation which will look bad on your credit report. Sustaining a business means the ability to manage your company’s expenses. 

5.    Check your company’s finances. Through this, you can keep your company’s credit record clean. It is essential to monitor all expenses and incoming monetary collection to maintain healthy financial habits.  A way to keep an eye on this is by making spreadsheets or documentations to check and balance your budget and expenses. Make sure that all transactions are updated and correctly recorded by you or your respective department. So as business owner, it is very significant that this is practiced by your company.

Given all these dos and dont’s, you can safely assume that running a business is no joke. This is especially when it comes to keeping your reputation clean and spotless. However, practicing all these tips can also be applied in handling your personal finances. Remember to not skip any part as all these guides are highly advised by experts to establish and maintain a great business credit.