How to build business credit, in order

Business credit is the record of how a company pays the people it owes: suppliers, lenders, card issuers. It lives in files the business credit bureaus keep under the company's name, separate from your personal credit report. It takes time to build, and the order matters.

1. Make the business its own entity

A sole proprietorship is you: its debts are your debts. A corporation or an LLC is a separate legal entity, which is what lets it hold credit in its own name. The SBA's guide to business structures compares the options; the right one depends on liability, taxes and how you plan to raise money, and a tax professional can help you pick.

2. Get an EIN, free, from the IRS

An employer identification number is the business's federal tax ID. The IRS issues it for free, online, in minutes if the application is approved, and warns that you never have to pay a fee for one: a site charging for an EIN is charging for something the IRS gives away. The online form asks for the Social Security number or ITIN of the person responsible for the business. That is normal, and it does not mean the EIN can stand in for your own number later (see EIN-only business credit).

3. Open a business bank account

Keep the company's money out of your personal account. The SBA lists the reasons: it helps protect you from personal liability, it lets customers pay the business, and it is where a business line of credit and a business card usually start. Banks typically ask for the EIN, the formation documents, any ownership agreement and your business license.

4. Look the same everywhere

Use one legal name, one address and one phone number on the bank account, the EIN, licenses and every application. Files are matched by those details, and a mismatch can split one company into two thin records.

5. Let a few accounts report

Payment history is what builds the file, and only accounts that report to the business bureaus count. Common first steps are supplier accounts with payment terms (see net 30 vendors) and a business credit card. Ask each one whether, and to whom, it reports before you count on it.

6. Pay early, not just on time

Business files often show how many days before or after the due date a company pays. Paying ahead of terms is what moves the record furthest.

What to expect in the first year

The SBA says it plainly: for a new business, loan eligibility is typically based on the owner's personal credit score. Most early business credit also asks for your personal guarantee. That is not a failure of the plan; it is the plan. The business file grows underneath, and your personal credit carries the company until it can stand on its own. Keep both clean: Credit Help covers the personal side.