How to Open a Business Credit File: The Ultimate Guide
For the business credit bureau Dun and Bradstreet, you do need to open a business credit file by applying for a DUNS number. We cover that in step 3.
But for the other business credit bureaus, simply establishing a clear business identity and making on-time payments on multiple business tradelines will automatically trigger a new business credit report for your business.
Here’s a step-by-step guide to help you open a business credit file for your company and begin creating a good credit history.
Step 1: Register Your Business Entity
To open a business credit file, start by registering your business entity with your state. If you haven’t decided on a legal structure yet, here are the primary options available:
- Sole proprietorship
- Limited liability company (LLC)
Sole proprietorships and partnerships are the default options for self-employed individuals and those going into business with another person, respectively. They don’t require paperwork to establish, but they lack liability protection, and some creditors may refuse to work with them.
Corporations and LLCs require more administrative work to establish and maintain, but they offer liability protection and demonstrate legitimacy with creditors. As distinct legal entities, they also help to separate your personal and business credit profiles.
Consider consulting with a Certified Public Accountant if you need help choosing a structure. Once you’ve decided, fill out the paperwork and pay whatever fees are necessary to register business with the appropriate agencies in your state.
Step 2: Get an EIN
Once you’ve registered with your state, the next step is to repeat the process with the federal government. That involves applying for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS).
An EIN is a nine-digit number unique to your business that helps identify your business when you file your taxes, open a business bank account, or apply for small business credit. Think of it as your company's Social Security Number (SSN).
Fortunately, getting an EIN is free and straightforward. You can complete the process online through the IRS portal by providing information like your business name, address, and legal structure. You should receive your EIN immediately upon finishing.
Step 3: Register for a D-U-N-S Number
Dun & Bradstreet (D&B) is one of the primary business credit bureaus in charge of compiling your company’s data into a business credit report. Many organizations use it to help inform their credit decisions, including the Small Business Administration (SBA).
Interestingly, D&B is the only business credit bureau that requires you to register before it’ll build your credit profile. To initiate the process, you must request a D-U-N-S Number, which identifies your company in its system.
Applying for a D-U-N-S Number works a lot like requesting an EIN. You can complete the process online for free, during which you’ll need to provide basic information about your company like its legal name and number of employees.
However, it usually takes longer to receive your D-U-N-S Number than your EIN, with standard processing taking up to 30 business days. But you can reduce that to eight business days if you pay to expedite the process.
Step 4: Open Business Tradelines and Make Timely Payments
At this point, you’re all set to start establishing your company’s business credit history. Just as you would do to build your personal credit score, this requires opening multiple credit accounts that report to the bureaus and paying them off on time each month.
A business credit account is known as a tradeline. The two primary types include the following:
- Vendor tradeline: Also referred to as trade credit, this is an account with a business that doesn’t specialize in extending credit, such as a supplier. They’re often extended payment terms, such as net 60 accounts, and are the easiest to qualify for as a small new business owner.
- Financial tradeline: This is a credit account from an online lender or traditional institution, such as a small business loan or business credit card. You usually won’t be able to qualify for them until you’ve established a credit history with vendor accounts unless you rely on your personal credit.
Unlike personal credit accounts, business tradelines usually aren't reported to every business credit reporting agency. Since you need around three with each bureau to establish a credit file with them, you may need to apply for more than you expect.
Your business credit reports (ie, your “business credit files”) won’t get created unless you have business tradelines that report to the business credit bureaus.
We created eCredable’s Business Lift product to solve that problem. It reports your regular business bills to multiple business credit bureaus for an affordable price. Read more about it here.
Step 5: Monitor Your Business Credit
After establishing a business credit file with each bureau, keep a watchful eye on them. Not only will that help you catch any issues quickly, but knowledge of your business credit scores can also inform your lender choice when you’re ready for financing.
The primary business credit reports and scores to keep track of come from the following credit bureaus:
- Dun & Bradstreet
- Experian Business
- Equifax Business
Creditsafe is another business credit bureau that is more popular with multinational companies.
Unfortunately, the protections that the Fair Credit Reporting Act (FCRA) provides consumers don’t apply to businesses. Unlike your personal credit report, you’re not entitled to a free copy of your business report every year.
As a result, you’ll generally need to pay to get consistent access to your data. You can purchase your reports and scores from the bureaus directly or through a third party like Nav.
How Long Does It Take To Build Business Credit?
The pace of your credit building always depends on which accounts you open and how disciplined you are with using them.
In addition, there’s more uncertainty with business credit scores because they’re so different.
For example, D&B’s PAYDEX score only considers payment timeliness over the last two years, while Experian’s Intelliscore Plus also uses factors like credit utilization to assess credit risk.
That said, building business credit is a long-term project. It takes months to make meaningful progress. As a rough estimate, you should expect it to take between one and three years to build credit that’s sufficient for your goals.
Remember, it’s not enough to open a handful of business tradelines. You must also demonstrate that you can use them responsibly by making timely payments on each credit line for an extended period.
How Do I Create a Credit Profile for My Business?
To create a credit profile for your business, register your company with the appropriate state and federal agencies. Next, request a D-U-N-S Number from D&B, the only credit bureau that requires registration.
With that done, try to open three tradelines that report to each bureau you want to create a credit profile with and make all your payments on time. Generally, vendor tradelines are the best to target first, as they’re the easiest to qualify for.
How Do I Build My Business Credit ASAP?
Building business credit is a time-intensive process that you won’t be able to complete overnight. However, you can maximize your pace by acquiring as many tradelines as you can maintain without missing payments.
If you’re looking for quick results, one great option is to sign up for an eCredable subscription. Not only can we report your certain ongoing business expenses to the business credit bureaus, but we can also add 24 months of payment history.
How Do I Apply for Business Credit With Bad Personal Credit?
Having bad personal credit makes it harder to qualify for business credit accounts. However, there are tradelines you can open without having to undergo a personal credit check or sign a personal guarantee, like eCredable’s.
Consider targeting these accounts if you have bad credit. It’s also a good idea to spend time working on your personal credit score while building your business credit to help expand your options.