How to build business credit for small business loans

Your business credit score is essential to your business’s reputation. It is a reflection of the financial health and strength of your company, and can help you secure better terms on loans, contracts and insurance.¹

Building and maintaining your credit takes time and effort, and there are steps you can take to achieve a higher score—like registering your business, opening and managing credit cards and being a reliable partner to vendors and lenders. While not every item in this list is right for every company, here’s a short list of ideas to consider that can help get you started:

1. Check your business registration

If you’re setting up your business, the first step toward establishing credit is incorporating and registering your business so credit reporters can accurately give your score.² Double check that you’ve received an EIN number from the IRS and a D-U-N-S number from Dun & Bradstreet. These numbers and registrations help companies trace actions back to your business to generate credit.

2. Sign up for business credit cards

To boost your credit, you need to borrow from lenders that report to credit bureaus, and credit cards are a helpful place to start.² Open a business credit card early using personal credit, pay your balances on time (or early if possible) and only utilize about 30% of your available balance to maintain a strong score.¹

3. Minimize business credit card utilization

As stated above, maintaining credit utilization below 30% is important to your score. How do you do that?

• Pay your balances off early and keep close track of reporting periods. Some reports to bureaus happen mid-month, and if your balance is above the 30% threshold at that point your credit score might take a hit, even if you pay it off monthly.³ The best way to mitigate this risk is to pay off balances as soon as possible.
• Utilize multiple credit cards.
• Ask for a limit increase. This could result in a hard inquiry originally, but it could be helpful in the long run.³
• Consider using a personal loan to pay off business credit cards. This can be tricky, as you will have to qualify for the personal loan; however, if you have excellent personal credit, it could be worthwhile.³

4. Maintain your personal credit score

Though it’s possible to have strong business credit with average or below-average personal credit, it’s safer to have strong personal credit when you are starting your business. Typically, business credit lenders will look at your personal credit (especially if you’re a sole proprietor)⁴ when establishing loans, so follow the same steps—low credit utilization, early and consistent payoffs—to maintain a strong personal credit score and get your business off the ground more easily.

5. Establish trade credit with vendors and suppliers

Trade credit allows you to pay vendors a few days or weeks after you receive your inventory, and this type of relationship can boost your credit if they report to a credit bureau.¹ Vendors that don’t report to a credit bureau can be listed as a trade reference on your account, and Dun & Bradstreet will follow up to collect your trade data.¹

6. Pay your dues on time

Consistent, on-time payments are the biggest contributing factor to your credit score.¹ Consider setting up early or automatic payments to make sure you don’t forget or miss a payment, as even one missed payment can negatively affect your score.

7. Review your credit report

Trade credit allows you to pay vendors a few days or weeks after you receive your inventory, and this type of relationship can boost your credit if they report to a credit bureau.¹ Vendors that don’t report to a credit bureau can be listed as a trade reference on your account, and Dun & Bradstreet will follow up to collect your trade data.¹

Frequently asked questions

How long does it take to build business credit?

Building business credit is a marathon, not a sprint. It can take businesses up to three years to build a strong credit portfolio, but opening credit cards and managing the debt you accrue properly is vital to boosting your score.⁵ Be patient and diligent and it will pay off!

What is a good business credit score?

Business credit scores vary depending on the scale, but some good ranges and scores are below:

• Small Business Score by FICO: Scale goes to 300, where 140+ is considered to be a decent number⁶
• PAYDEX by D&B: Scale goes to 100, and lenders look for 80+⁶
• Business Credit Report by EQUIFAX: Scale ranges from 101 to 992, and scores of 570+ are favorable⁶
• CreditScore by Experian: Scale goes to 100, and 76+ is usually favorable⁶

Get business insurance for your small business

As you increase your credit score (and your business grows), you will need additional support and security to make sure your business, your investments and employees are protected, no matter what happens. Learn more about how Nationwide can protect you with business insurance solutions here.

[1] “ How to Get and Build Business Credit in 9 Steps” Kelsey Sheehy, https://www.nerdwallet.com/article/small-business/how-to-build-business-credit-small-business-loans (Accessed November 2023)
[2] “What is business credit, and how can I build it?” Louis DeNicola, https://www.creditkarma.com/advice/i/build-manage-small-business-credit (Accessed November 2023)
[3] “6 ways to lower your credit card utilization” Louis DeNicola, https://www.creditkarma.com/advice/i/how-to-lower-your-credit-card-utilization (Accessed November 2023)
[4] “How to build business credit: 7 steps” Meaghan Hunt, https://www.bankrate.com/loans/small-business/how-to-build-business-credit/ (Accessed November 2023)
[5] “How to establish & build business credit in 2023” Stefanie Gordon, https://ramp.com/blog/how-to-establish-build-business-credit (Accessed November 2023)
[6] “What is a Good Credit score: Tips for Improvement” https://www.fundkite.com/blog/what-is-good-business-credit-score/ (Accessed November 2023)