How to Build Business Credit With Bad Personal Credit 

Self-employed people often have to leverage their personal credit history to get their first few business credit accounts. Unfortunately, that can make bad personal credit a significant obstacle to your business goals. 

If your personal score has suffered some setbacks, here’s what you need to know to build good business credit without relying on it. 

Is There Any Correlation Between Personal Credit and Business Credit? 

Technically, there’s no direct correlation between your personal and business credit scores since neither are scoring factors for the other. However, they relate in ways that you must understand when navigating credit accounts. 

First and foremost, creditors typically check your personal credit score when you apply for business financing. That’s especially common for new small business owners without a significant business credit history. 

Similarly, creditors may require that you sign a personal guarantee for your business line of credit. That lets them use your personal assets to satisfy your business’s debts if you fail to fulfill them. 

If you sign a personal guarantee and default, the business account will likely show as being in collections on both your personal and business credit reports. 

However, your business credit mistakes don’t have to be as drastic as a default to affect your personal credit. Many business credit card issuers report all negative activity to the consumer credit bureaus. For example, Chase reports any late monthly payments. 

Some card issuers also report positive activities to the personal bureaus, such as making timely payments and keeping a low credit utilization. That can benefit you, but all of these issuers report negative activity too, so there’s always a risk. 

While business credit activities show up on personal credit reports relatively often, it rarely goes the opposite way. You usually don’t have to worry about personal mistakes affecting your business credit score, especially if your company’s a separate legal entity. 

What’s the Difference Between Personal Credit and Business Credit? 

The fundamentals of the business and personal credit systems are similar. Creditors give accounts to borrowers who then use them how they will. Credit bureaus create reports on borrower activities, and creditors use them to inform future lending decisions. 

However, there are still notable differences between the two systems. Here are some of the most significant ones to be aware of: 

• Rules and regulations: Different laws apply to consumer and commercial credit issues. Most notably, the Fair Credit Reporting Act (FCRA) only applies to individuals, not businesses, so they don’t receive benefits like free annual copies of credit reports. 

• Credit scoring algorithms: Most consumer creditors use FICO scores to make lending decisions, but there’s no single dominant business credit score brand. In addition, the variations between business scores are much more significant than those between personal scores.  

• Credit reporting agencies: The main business credit bureaus are Dun & Bradstreet (D&B), Experian, and Equifax, but not TransUnion. Beyond the three main business credit bureaus, there are lesser known, but still common, bureaus, such as Creditsafe, PayNet, and Ansonia. In addition to creating credit reports, business bureaus issue their own scoring algorithms. 

Don’t assume that everything in the business credit world works the same as in the personal credit world. The broad strokes may be similar, but the rules and practices vary significantly. 

How To Build Business Credit Without Using Personal Credit 

You’ll struggle to qualify for business accounts using your name if you have a bad personal credit score. Here are some ways to get around that issue and build business credit anyway. 

1. Establish Your EIN 

Applying for business credit with your Social Security Number (SSN) is a sure way to get creditors to check your personal score. To separate your personal and business identities, you must get an Employer Identification Number (EIN). 

An EIN is a nine-digit number from the Internal Revenue Service (IRS) that’s like an SSN for your company.  

You can provide it instead of your SSN on credit applications to take out accounts in your business’s name. However, not every lender lets you, especially if you have no business credit history. 

(Keep in mind that business lenders may ask for your SSN to comply with Know Your Customer laws, even if they don’t check your personal credit.)  

If you organized your business as a corporation or limited liability company, you should already have an EIN since they’re necessary to file your taxes. They’re optional for sole proprietors, but you can still request one for free through the IRS digital application. 

You’ll need to provide details like your name, address, legal entity structure, and a reason for applying. It should take about 15 minutes to complete, and you’ll receive your EIN immediately. 

2. Get Your DUNS Number 

Dun & Bradstreet is the oldest business credit bureau and one of the most popular among creditors. However, it generally won’t generate a credit report or score for your business until you register with the agency and get a DUNS number. 

Like an EIN, a DUNS number is a nine-digit numerical identifier for your business. It’s primarily for tracking your company in D&B’s systems, but you may also need it to identify your company in other scenarios, such as applying for government contracts. 

Getting a DUNS number is a lot like requesting an EIN. There’s a free digital application, and it’ll ask you for many of the same basic details. 

However, you’ll usually have to wait longer to get a response. It can take up to 30 business days to receive your DUNS number unless you pay to expedite the process, reducing the timeline to eight business days. 

3. Get Vendor Tradelines 

Once you’ve laid the groundwork for your company's identity as a separate entity, you can establish its business credit profile. With a DUNS number, you can also build business credit with D&B. 

To get around the fact that you have bad personal credit, target accounts that have low personal credit requirements or forgo the personal credit check altogether. Unfortunately, that generally excludes financial tradelines. 

Instead, you’ll probably need to start with trade credit, such as net 30, net 60, and net 90 arrangements. These vendor tradelines are extended repayment terms that give you one to three months of interest-free financing with specific businesses. 

Fortunately, they’re pretty easy to qualify for. Many businesses would be willing to offer them to a relatively new small business owner, and some will do so without requiring you to undergo a credit check. 

4. Get eCredable 

Another excellent way to build business credit with bad personal credit is to sign up for the eCredable Business Lift program. Because it’s not a credit account, you don't need a good credit score to qualify. 

Our service lets you report an unlimited number of recurring business expenses to Equifax and Creditsafe, including 24 months of payment history. That turns them into vendor tradelines and can boost your score significantly, almost overnight!  

We’ll also report your subscription payment to D&B and Experian, ensuring you establish a healthy credit history with all the primary business credit reporting agencies. You can cancel at any time without penalty, so give it a try today! 

5. Apply for Business Credit Cards 

Business credit cards are much easier to get as a small business owner than a small business loan. Many require a personal credit check, but some will let you apply with your EIN once you have enough business credit history from vendor tradelines. 

Aim to have at least six months to a year of positive payment history with five or six vendor tradelines before you start applying for business credit cards with your EIN. 

When selecting cards to target, remember to consider which business credit bureaus they report to, as many card issuers report only to one or two.  

Only Capital One, Chase, and Citi report to D&B, Experian, Equifax, and the Small Business Financial Exchange (SBFE) in 2023. 

6. Always Pay on Time (Or Early) 

The primary purpose of credit scores is to help creditors determine how likely borrowers are to pay back what they owe. As a result, payment history is the most impactful factor for most of them. 

That still tends to be the case with business credit scores, even though there’s significantly more variation between them than personal ones. As a result, you should always prioritize making your payments on time when building credit. 

The safest way to do that is to use your credit cards conservatively. Keep your credit utilization well below your credit limit and avoid spending more than you have in cash. That minimizes the risk of failing to meet your obligations in a low cash flow period. 

7. Monitor Your Business Credit 

Lastly, check in with your business credit scores and reports. Not only will that help you catch potential issues early, but it will also help you keep track of your progress and stay motivated. 

Don’t forget to scan your business credit report for errors as well. They happen more often than you might think and can harm your score significantly, especially if they mess up your payment history or outstanding balances. 

Unfortunately, because the FCRA doesn’t apply to businesses, you don’t have the right to a free copy of your business reports from the bureaus, so you’ll usually have to pay to get access to your information. 

However, it should still be readily accessible. You can get copies of your reports directly from the credit reporting agencies, but it's often better to get them from a business credit monitoring service like Nav. 

Remember that building a good business credit score can take years, especially when you have bad credit personally. Don’t wait until you need business financing to address the issue because it’ll be too late. Get started today! 

Learn More About Building Business Credit: 

- How To Build Business Credit Without Using Personal Credit
- How Long Does it Take to Build Business Credit? 
- Low Risk Industries for Business Credit 
- Can You Buy a House with Business Credit?