How to build business credit fast: 5 useful tips

The financial toll of the COVID-19 pandemic hit business owners hard from the first shutdowns onward. Struggling to pay employees and themselves, over a third of small business owners dipped into their personal finances—often using personal credit cards—to keep their operations going. Now that the pandemic is on its way out, it’s time to learn how to build business credit fast while giving your personal credit score room to improve.

Discover five ways to improve business credit scores quickly, all while protecting your personal credit.

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    Key business takeaways

• Keeping your business credit score at 80 or higher is ideal no matter what type of business you have
• Your payment history significantly impacts your business credit score, so on-time payments are a must
• Talk to lenders to explore new repayment options if you’re struggling to pay monthly minimums

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1. Assess the damage

Bouncing back from credit damage is easier when you understand where your credit currently stands. To start, you must know what it means to have a good score. Business credit scores, which range from zero to 100, are considered ideal when they reach or exceed 80 and poor when they drop to 30 or below.

So how do you check your credit score? All three major business credit bureaus—Dun & Bradstreet, Equifax, and Experian—offer online tools that you can use to access your current business credit report. (Dun & Bradstreet’s CreditSignal is free.) Using these tools, you can review your negative marks and identify what you need to improve. For example, if missed payments are hurting your score more than anything, building business credit fast could be as easy as making on-time payments.

If you used personal credit for your business expenses, you can see the impact of that spending by pulling your personal credit profile for free with Credit Sesame. When analyzing your report, look out for negative marks associated with your business spending, like those for business credit card inquiries or high spending. This way, you can pinpoint areas you can work on to build business credit and personal credit together.

• Do analyze your business credit history for opportunities to improve.

• Avoid changing your business growth strategy before identifying what’s actually hurting your credit. For example, you may discover that there’s no need to change your spending, so you can keep investing in key business needs, like marketing and inventory.

2. Avoid late payments

If you’ve missed payments on any of your small business credit accounts, make an effort not to miss any more. Your payment history makes up 35% of what determines your credit score. Late payments and underpaid bills can quickly add negative marks to your business credit profile. Plus, the interest rates on your outstanding balance can be significant, further hurting your general business finance.

Naturally, one of the best ways to achieve good business credit—as well as personal credit—is by making on-time payments. At the minimum, you should always pay what you owe to avoid any delinquencies (or missed payments) on your record. When your account goes delinquent, some business credit issuers will report to personal credit bureaus in addition to business ones, hurting both your credit scores. 

• Do look at your business bank account balance and monthly revenue. Know how much credit you can realistically cover each month, with your current outstanding balance and interest rates in mind. It’s also good practice to check your personal credit score frequently to see how your business and personal credit profiles overlap. This can also help you identify any errors, like fraud or an incorrectly labeled delinquent account, so you can correct them and help prevent your score from decreasing. 

• Avoid spending more than you can afford. This way, you can avoid using personal credit to cover your business credit usage.

3. Talk to your lenders

When you’re facing major business financing issues, even keeping up with monthly minimum payments can be a struggle. For example, if your business was forced to close for several months during the pandemic, you may still have growing debt from covering rent, salaries, and office supplies with no positive cash flow. If this is the case, figuring out how to build business credit fast requires you to proactively reach out to lenders.

Ultimately, your lenders would rather have you pay than not. Oftentimes, they’re willing to work with you on a payment plan, especially if you own an established business that proved its creditworthiness in the past. At the very least, lenders can help you explore new options for repayment, like using new lines of credit with more affordable interest rates to pay off business credit card debt.

• Do identify one point of contact at your lending company who you can reach out to for payment assistance, deferral requests, and more.

• Avoid defaulting on loans. If you continue to miss payments without reaching out to lenders, this can drastically reduce your credit rating.

4. Keep your credit utilization low

Your credit utilization ratio—which is the percentage of your total credit limit that you’re using—is a major factor in your credit score. If you have a business line of credit or credit card, using 30% or more of your available credit can hurt your score. Keeping your usage under 10% is ideal and can drive up your credit score faster.

Paying down your debt is an effective way to achieve strong business credit without wasted time. When you free up some of your credit line, business credit reporting agencies will see you as less of a risk for lenders, which can positively impact your score.

• Do pay your balance in full every month when possible.

• Don’t forget to check your credit limits. Credit card issuers, for instance, aren’t required to tell you when they decrease your limits, so you could have a credit utilization ratio of 30% or higher without knowing.

5. Understand your small business loans

When you want to build business credit fast, it’s crucial to know the ways different loans and lenders can affect your personal and business credit scores. Many banks and credit card issuers, like Discover and Capital One, will report to both business and personal credit bureaus. If this is the case, staying on top of your payments and limiting your credit utilization is a must for protecting your scores.

If you’re considering taking on a new loan to build your business credit, opt for one that doesn’t require a personal guarantee, which can put your personal assets and credit score at risk if you default on your loan.

• Do consider changing your business structure if you own a sole proprietorship, which doesn’t protect your personal assets. You can access more financing without affecting your personal credit history if you own a limited liability company (LLC), S corp, or C corp.

• Avoid applying for too many loans at once. Every hard credit check can stay on your business credit file for two years and impact your score for 12 months or more.

Learn how to build business credit fast and boost your finances

Building business credit can be a difficult journey after a rough season for your finances. But with the right strategies, like making on-time payments and keeping your credit utilization low, you’ll start on the right path to strong business credit. If you need a little revenue boost to help pay off your debt, learn about new ways to price your product that could help you profit more.