Steps to establish business credit

1. Incorporate your business. Even though you may be incorporated when you’re reading this, it deserves a mention. With sole proprietorships and general partnerships, the business is legally the same as the owner; therefore, there can be no separation of business credit history from personal. Incorporating a business or forming an LLC creates a business that is legally separate from the owner(s).
2. Obtain a federal tax identification number (EIN). The EIN is basically a social security number for a business. It is required on federal tax filings, and is also required to open a business bank account in the name of the corporation or LLC. In order to comply with IRS requirements, many larger businesses also require an EIN from their vendors in order to pay them for services provided.
3. Open a business bank account. Open a business checking account in the legal business name. Once open, be sure to pay the financial transactions of the business from that account. If you use a business credit card (see below) for many financial transactions, be sure to pay the credit card bill from your business checking account.
4. Establish a business phone number. Whether you use a landline, cell phone or you use VoIP, have a separate number for your business and in your business’s legal name. List that number in the directory so it can be found.
5. Open a business credit file. Open the related file with all three business reporting agencies: Experian, Equifax and TransUnion.
6. Obtain business credit card(s). Obtain at least one business credit card that is not linked to you or any other owners personally. Pick a card from a company that reports to the credit reporting agencies.
7. Establish a line of credit with vendors or suppliers. Work with at least five vendors and/or suppliers to create credit for your company to use when purchasing with them. Ask them to report your payment history to the credit reporting agencies.
8. Pay your bills on time. Perhaps it should go unsaid, but be sure to pay your bills on time. Like with your personal credit, late payments will negatively impact your business credit.

Benefits of having good business credit

Having good business core can provide a number of benefits, including:

Positioning your company for more favorable payment terms with new vendors and suppliers.

Reducing the number of times you will need to prepay for products or services purchased.

Allowing you to obtain better interest rates and credit terms from lenders and banks.Once you have established and built good score, be sure to monitor and protect it, just as you do with your personal credit.