How do you start building and establishing your business credit? Do you know why you weren’t approved for that business loan that you recently applied for? Business credit doesn’t work exactly the same a personal credit, so you’ll want to understand the key differences. Otherwise, you might not get the best terms or interest rates if you don’t have a good business score rating. If you’re currently a sole proprietorship, know that this is NOT a legal entity. You will want to set up a legal entity such as a limited liability company (LLC) or corporation in order to correctly build your business credit.
Top Questions & Answers for Understanding Your Business Credit
I recently participated in a Twitter Chat forum hosted by Experian. Here are a list of questions posted by Experian and my replies for the #CreditChat.
Q1: Why should you separate business credit from personal credit?
- A1: By separating your business and personal finances, you can clearly see if your business is profitable or losing money.
- A1: You can find real-life examples of business owners who mixed personal and business finances…and learned the hard way in my bestselling book, Small Business Finance for the Busy Entrepreneur – Blueprint for Building a Solid, Profitable Business
Q2: How do you establish small business credit?
- A2: First, set up a legal entity for your business and apply for an employee identification number (EIN). Then open a business bank account and credit card. Do NOT use your SSN and know that a sole proprietorship is NOT a legal entity.
- Q2: I share in Chapter 16 of my business finance book how being a sole proprietorship can ruin your personal credit. Always separate personal and business credit! https://amzn.to/2PHEmQq
Q3: Is it possible to build business credit with poor personal credit?
- A3: You can still build business credit, but your offerings may be limited and interest rates will likely be higher.
- A3: For those who forget about bill due dates, set a recurring meeting reminder on your online calendar to pay your bills on-time!
Q4: What should you look for when shopping for a business credit card?
- A4: Look for a business credit card that gives you either cash back or rewards bonus points on categories that your business typically spends the most money on, such as travel, office supplies, computer software, etc.
- A4: Also check to see if the business credit card reports back to commercial credit agencies to help you build your credit. Nav has a great article: Which Credit Cards Can Help Me Build Business Credit?
Q5: How do you get a credit report for a business?
- A5: I like Nav for getting small business credit reports. Here’s a link to sign up to get small business score and detailed report: Nav for Business Credit Report & Score
Q6: How are business credit scores determined?
- Factors that go into business credit include personal credit history, shipping history, and payment history.
Q7: How do you correct or dispute information on your business credit report?
- A7: Download and keep copies of bank and credit card statements! Know that most banks will only let you see 12-18 months online, and then you have to pay fees to access prior years.
Q8: How do you get higher limits for your business credit?
- A8: Make sure you have credit cards with companies that report back to commercial agencies to show payment history and good standing.
Q9: Do business credit cards affect your personal credit?
- A9: Your business credit history can impact your personal credit, especially if you guaranteed your business credit card with your personal SSN. Know that some cards will report all activity, while others only report if you are late and default.
Q10: Any final tips on establishing, building, and monitoring small business credit?
- A10: Open 3 business bank accounts to help manage business finances. Check out my free Ultimate Guide to Organizing Your Business Finances for why I tell all small business owners they need 3 accounts: https://smifinancialcoaching.com/ultimate-guide-to-organizing-your-business-finances/
To find all responses to this Twitter forum hosted by Experian, check out
How to Get a Copy of Your Business Score and Credit Report
If you’d like to get a copy of your business credit report and score from Nav, here are two options:
Standard (free, letter grade only): https://smifinancialcoaching.com/nav
Premium ($24.99 / month, business credit scores and full detailed credit reports): https://smifinancialcoaching.com/nav/premium
(*Note – If you are just interested in getting a one-time detailed copy of your report, you can sign up for the Premium for one month, and then cancel before the next billing date.)
Summary: Understanding Your Business Credit
If you’re looking to get the best financing and terms for your small business, you will want to understand what is currently on your business and personal credit reports, and correct or dispute any incorrect information. Make sure that you’ve correctly separated your business and personal finances so your small business is building a credit history of its own. Then, use on-time payments and shipping to build up your credit score.
Have you checked your business credit score and report lately? Did you find any errors? My clients have found errors on their reports, so be sure to get a copy of your detailed report and work to fix incorrect information about your business!