How to Build Business Credit Quickly

The Importance of Credit

Securing credit is the lifeblood of a growing business. Whether you’re planning an expansion, facing unexpected repairs, or making a major purchase, access to capital is key. But if your business credit score isn’t where it needs to be, you could be left scrambling for funding or stuck with less-than-ideal loan terms. Even suppliers and vendors may hesitate to extend payment terms without solid credit.

Building strong business credit can open doors to better opportunities, smoother operations, and more favorable financial partnerships – making it a crucial asset for long-term success.

Understanding the Numbers

Business credit is scored a little differently than personal credit. There are two scoring systems for businesses – most lenders will use one or both systems.

The first scoring system consists of three business credit reporting agencies: Experian, Equifax and Dun & Bradstreet. All three use a scoring range of 0-100. A score of 80 or higher is very good and what most lenders will want to see.

The second type of scoring is called FICO SBSS (Small Business Scoring System). This uses a scale from 0 to 300. FICO SBSS gives a complete picture, by combining an owner’s personal credit score and their business credit score, plus other factors like cash flow, the age of the business and any outstanding liens against the business. A FICO FBSS score over 220 is considered excellent.

So, while a business owner should not mix their business and personal credit, they should make sure their personal credit score is as high as possible, as many lenders, including SouthState, rely on the FICO SBSS for business lending.

Boosting Your Score

If your business credit score isn’t where it needs to be, here are some immediate steps to take:
 

• Pay down any large outstanding balances if possible.
• Try to get your credit usage under 30% of your total available credit.
• Look to see if you have any overdue payments, and if so, make them immediately.
• Check your credit report to see if there any errors to report.

Strengthening your score doesn’t happen overnight, but taking these steps can make a difference in as little as 90 days.

Staying in the Good Range

Once your company’s credit score has climbed into the range preferred by lenders, practicing these habits can help keep it there.
 

• Make every payment on time.
• If necessary, set up payment reminders to prevent late payments or tie automatic payments to a business credit card.
• Keep any seldom used business credit cards open, low balances will help your credit usage.
• Make sure your credit usage stays below 30% of the total available credit.
• Check your credit report periodically for any mistakes to correct.

Credit Separation is Key

Another good habit to practice is the avoidance of mixing business and personal credit, even if you are a sole proprietor. Having good business credit helps you resist the temptation of taking out a personal loan or personal credit cards to help fund your business. Keeping your business and personal credit separate can help protect your personal credit and personal liabilities if your business defaults on a loan. Plus, it makes things simpler when you file your taxes.

Starting Off Strong

If you’re planning on opening a business, there are several things you can do to help build your business credit early. 

Check Your Personal Credit

You want to make sure your personal credit score is at least in the good range, over 660 but preferably above 720. Pay down any high balances and look for any past due payments to clear up.

Get a DUNS Number

A DUNS (Data Universal Numbering System) number is assigned by Dun & Bradstreet, one of the three business credit reporting services. It’s a good way for a new business to establish credit and it’s free. A DUNS number allows other lenders and creditors from around the world to assess the health of your business. 

Open Business Banking Accounts

One of the most important steps a new business owner can do is to open dedicated business banking accounts. Separate business credit cards are also a must. Setting up those cards to cover any regular payments will help establish a good record for your business. And opening a line of credit with your bank can be helpful in a couple of ways: for covering unexpected costs and lowering your credit usage if you leave it untapped. 

Making the Turnaround

With the rising interest rates over the last couple of years, I’ve had many businesses come to me for help. Some had multiple business credit cards or lines of credit with variable rates, and they were struggling to manage their debt. As cash flow tightened, they relied more heavily on credit to cover operating expenses. When they couldn’t pay off their balances in full, their credit scores took a hit.

One solution I’ve offered is a debt consolidation loan. This allowed them to pay down high balances and combine their debt under a single, more manageable interest rate. Not only did this simplify their monthly payments, but it also helped improve their credit scores over time.

There are several ways businesses can address debt or improve credit scores. It’s always a good idea to talk to your banker about available solutions. Just remember, building or improving business credit is a long-term effort. Make sure to pay all your business bills on time, aim to pay off your credit card balances each month, and keep your credit usage below 30%. With these habits in place, your business credit score will improve over time.

Have questions about your small business finances? SouthState’s Small Business Bankers are ready to help. Get started here.