How Long Does It Take to Build Business Credit?

How Long Does It Take to Build Business Credit

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While you might be tempted to think that you can build business credit in 30 days, in reality, it takes much longer for most businesses. 

Let’s take a closer look at all of the essential information you need to know that will help you build your business credit quickly and effectively. 

How Long Can It Take to Build a Good Business Credit Score?

Generally speaking, some experts estimate that it can take around one to two years to build business credit. The real answer? It depends on numerous factors. 

If you’re starting with no business credit at all, then it will take at least 12 months to build out a solid business credit profile. This means that you have 10+ accounts on your business credit reports with 10+ months of on-time payments. You should have a mix of vendor and financial tradelins.

This is because you have to start with vendor credit accounts and credit builder products. (These are known as tier 1 business credit vendors.) Then move on to tier 2 business credit vendors, until finally you can qualify for the most favorable credit products. 

If you already have some business credit established, then you can move much faster. If you access many accounts and start making payments right away, your business credit scores can fly much higher within the next 3 months.

If you have damaged business credit, meaning that you have late payments, past due accounts, and so on, then it may take a full two years to clean that up. 

To build a good business credit score fast, you’ll have to focus on following some of the current best practices, which we’ll cover in greater detail below. 

The answer also depends on which credit score you’re focusing on. 

Unlike personal credit, your score will vary depending on the credit bureau you’re evaluating. For example:

  • A good business credit score on Dun & Bradstreet’s PAYDEX scale (0-100) ranges anywhere from 80 to 100.
  • A good business score according to Intelliscore℠ Plus from Experian (0-100) ranges anywhere from 76 to 100.
  • Equifax offers multiple business credit scores that are different from the above. This includes the Equifax Business Credit Risk Score and the Equifax Business Failure Score, ranging from 101 to 992 and 1,000 to 1,610, respectively. There’s also the Equifax Business Delinquency Financial Score, which ranges from 101 to 650. A score of anywhere from 585 to 650 is considered good. 

With all this in mind, what do you need to do in order to fall within the target ranges listed above? 

The Importance of Building Business Credit

Why is business credit so crucial for businesses to focus on in their initial stages? There are several reasons why you should be focused on building business credit now. These include: 

  • Access to Much-Needed Financing: A small business running on fumes can’t sustain itself for long. Leveraging business credit will help you tap into a variety of financing opportunities, giving you the funding you need to pay to finance operations, hire employees, and more. 
  • Better Loan Terms: Building business credit helps you access better funding opportunities, all while taking advantage of better loan terms that support your business’s growth. 
  • Separation of Personal and Business Credit: Funding your business with your own personal credit can get messy fast. Not only does it make it difficult to track your finances, but it could put your credit score at risk, hindering your ability to do something as simple as secure an apartment or a car loan should you need it.
  • Establishes Credibility and Trustworthiness: Lenders aren’t the only ones who look at your business credit. Potential suppliers, business partners, and investors can also check your business’s credit. Being reliable and trustworthy in regard to finances is crucial in business. 
  • Promotes Long-Term Growth: You will likely leverage business credit throughout your business’s lifespan. The more you can borrow, the faster you can grow. The faster you grow, the more you’ll earn, and so on. If you’re looking to achieve your long-term business goals, business credit is everything. 

How to Build Business Credit

Building a business credit score is far less difficult than it might sound. Here are a few tips that will help you streamline the process. 

1. Establish Your EIN

An employee identification number (EIN) is a must-have when you’re building business credit. Besides being an essential component in running a business, an EIN helps you keep your business credit and personal credit separate. 

In fact, while an SSN is generally required when you begin building your business credit, there are ways to circumvent this by only applying for lines of credit that will accept your EIN. The EIN application process is simple and can be done here

2. Register With Dun & Bradstreet

We covered some of the major credit bureaus and related scores in the section above. 

But while Equifax and Experian scores are important to pay attention to, Dun & Bradstreet is the top bureau when it comes to small business credit. 

Dun & Bradstreet offers what’s known as a D-U-N-S number, a unique nine-digit identifier that provides other businesses with your credit profile. It also helps you establish credibility with potential partners, establishing that you are an active business. 

When you provide this on applications, vendors, lenders, and other parties can use it to learn more about your business and determine whether or not you’re a reliable borrower. 

The process is free, and you can apply to get your own D-U-N-S number within 30 business days. If you opt for the expedited number, you can expect to receive your number in as few as eight business days. 

3. Get a Business Credit Builder Loan

Credit builder loans are an invaluable resource for businesses looking to build their credit. 

Aptly named, credit builder loans are loans that will approve you for a specified amount. However, rather than giving you that amount, you will actively pay that loan back over time. Each of your payments is then stored in a savings account. 

Once you’ve reached the end of your loan agreement, you’ll have developed positive repayment history and will get your money back. It’s a win-win as long as you follow through on the agreed-upon repayment terms. 

4. Get Net 30 Accounts

Getting a net 30, net 60, or net 90 vendor account is another excellent way to build business credit. 

Vendor accounts refer to suppliers who offer a buy now, pay later option for businesses stocking up on supplies or taking advantage of their services. Meanwhile, 30, 60, and 90 refer to the repayment period (30, 60, and 90 days later). 

Establishing these vendor accounts with suppliers who report to the major business credit bureaus helps you build your credit quickly, especially when you opt for net 30 accounts starting out. 

5. Scan Your Business Credit Report for Errors

Checking your credit report regularly is not only important to assess your progress and see how you’ll fare when applying for future financing opportunities. 

For some, checking their business credit report can mean the difference between having an item on there that doesn’t belong and affects their credit and being able to dispute it so it doesn’t cause further damage. 

If you do happen to spot something incorrect, reach out directly to business credit bureaus to rectify the situation as soon as possible. It may take some time, but it’s well worth the effort when you’re looking to boost your score. 

6. Always Pay on Time

Your repayment history is one of the biggest factors that will influence your business credit score. 

If you always pay on time and follow the other advice listed here, you’ll see your score rise. 

If you fail to make a payment, it becomes a derogatory mark that can sink your score and influence whether or not you’re able to secure other sources of funding moving forward. 

Always pay on time, and make sure that you’re not in over your head when you start tapping into funding. 

Fun fact: Dun and Bradstreet’s PAYDEX score requires that you make payments early to get the best score possible. 

7. Apply for Business Credit Cards

Business credit cards can be a helpful resource for building credit while paying for day-to-day business expenses. 

For those just starting out, you should be looking into business credit cards that accept just an EIN. In this case, you might be limited to unsecured credit cards. But you’ll be able to sign up for cards with terms and credit limits that are more beneficial to you as you build your credit. 

8. Monitor Your Business Credit

Check your score at least every month to make sure your efforts are paying off. 

Many of the credit bureaus listed above offer credit monitoring services that will help you stay on top of your score with ease. Dun & Bradstreet even offers a free credit monitoring option for 14 days to help you get started. 

Business credit is vital to financing your business and working towards significant growth. Use the tips above to better understand your credit scores, come up with a realistic timeline for building your credit, and adhere to best practices for faster results. 

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