How to build business credit without using personal credit

As an entrepreneur or aspiring business owner, having access to credit is essential for your success. Business credit not only opens up significant amounts of money that you can use to grow your company, but it also helps you keep your personal and business finances separate. In this article, we'll explore how you can build a strong business credit profile without relying on your personal credit or guarantees.

Understanding business and personal credit

Before we get into the details of building business credit, it's important to understand the difference between personal and business credit. Personal credit is handled by the three main credit bureaus: Equifax, Experian, and TransUnion. These bureaus keep track of your personal credit history, including credit cards, mortgages, car loans, and other consumer debts.

Business credit, however, works differently. While Equifax and Experian also have business credit divisions, the main business credit reporting agency is Dun & Bradstreet (D&B). D&B keeps a large database of business credit information, including payment histories, credit utilization, and other financial data.

The biggest benefit of business credit is that it's completely separate from your personal credit. This means that any business loans, credit cards, or lines of credit you get won't show up on your personal credit report, and the other way around. This separation allows you to build a strong business credit profile without affecting your personal credit score.

How to build business credit without using personal credit

Now that you understand the importance of separating your personal and business credit, let's dive into the steps you can take to build a strong business credit profile without relying on your personal credit.

1. Establish a legal business entity

The first step in building business credit is to create a legal business entity. This could be a limited liability company (LLC), a corporation (S-Corp or C-Corp), or a partnership. Registering your business with your state's Secretary of State or the right governing body is crucial because it gives you the necessary paperwork and legal structure to operate as a separate entity from yourself.

After registering your business, you'll need to get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This nine-digit number acts as your business's Social Security Number (SSN) equivalent, and is needed for various business activities like opening a business bank account and applying for credit.

2. Set up business essentials

To build a credible business credit profile, you'll need to set up the following essentials:

• Business address: Get a physical address for your business, whether it's a commercial space, a virtual office, or a dedicated home office address.
• Business phone number: Get a dedicated business phone number, which can be a landline or a virtual number.
• Business email address: Create an email address that includes your business's domain name (e.g., [email protected]).
• Business website: Create a professional website that represents your business and what it offers.
• Business bank account: Open a separate bank account in your business's name. This is key for establishing a financial history and keeping your personal and business finances separate.

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Having these essentials in place helps create a legitimate and professional business presence, which is crucial for building business credit.

3. Obtain a DUNS number

Dun & Bradstreet is the main business credit reporting agency, and getting a D&B number (also known as a DUNS number) is an important step in building your business credit profile. This unique nine-digit number identifies your business and allows creditors and suppliers to report your payment history and other financial information to D&B.

You can get a DUNS number for free by visiting the D&B website and following the application process. After submitting your application, D&B will mail you a verification code, which you'll need to enter on their website to complete the process and activate your DUNS number.

4. Establish initial trade lines

Trade lines are basically credit accounts that report your payment history to the business credit bureaus. Establishing initial trade lines is necessary for building a solid business credit profile from scratch.

To establish trade lines, consider the following steps:

• Identify companies that extend credit to new businesses and report to business credit bureaus.
• Make a purchase from each company and pay the invoice within the agreed-upon timeframe (e.g., 30, 60, or 90 days).
• Ensure timely payments to establish a positive payment history with the credit bureaus.

By establishing these initial trade lines and making timely payments, you'll start building a positive payment history with D&B, which is essential for improving your business credit score (known as the PAYDEX score) and qualifying for higher credit limits in the future.

5. Obtain business credit cards and lines of credit

As your business credit profile grows stronger, you'll have more opportunities to get business credit cards and lines of credit. Here are a few strategies to consider:

• Business credit cards: Many banks and credit card issuers offer business credit cards specifically designed for small businesses. These cards can be secured (requiring a refundable deposit) or unsecured, and they report your payment history and credit utilization to the business credit bureaus. 

• Business lines of credit: A business line of credit works similarly to a credit card but typically offers higher credit limits and more flexibility in terms of access to funds. As your business credit profile improves, lenders may offer you unsecured lines of credit based on your creditworthiness.

• Vendor credit accounts: In addition to the initial trade lines you established, you can continue to open credit accounts with various vendors and suppliers. These accounts not only provide you with net terms for purchasing goods and services but also contribute to your overall business credit profile.

When applying for business credit cards, lines of credit, or vendor accounts, make sure to emphasize that you're seeking credit in your business's name and that you don't want to provide a personal guarantee or have the accounts reported on your personal credit.

6. Monitor and maintain your business credit profile

Building business credit is an ongoing process, and it's important to monitor and maintain your credit profile regularly. Here are a few tips to help you stay on track:

• Review your business credit reports: Periodically review your business credit reports from D&B, Experian Business, and Equifax Business to make sure that all information is accurate and up-to-date.
• Make payments on time: Timely payment is the most important factor in maintaining a strong business credit score. Set up automatic payments or reminders to ensure that you never miss a due date.‍
• Keep credit utilization low: While business credit scoring models are generally more lenient regarding credit utilization than personal credit models, it's still a good idea to keep your balances well below your credit limits.‍
• Monitor for fraudulent activity: Regularly review your business credit reports for any signs of fraudulent activity or errors, and promptly dispute any inaccuracies with the appropriate credit bureau.

By following these steps consistently, you'll not only maintain a strong business credit profile but also increase your chances of qualifying for higher credit limits and better terms in the future. 

Build your business credit with Ramp 

Ramp offers a corporate card that doesn't require a personal guarantee or credit check, allowing you to establish and strengthen your business credit profile based on factors like your company's revenue and cash balance. This approach simplifies the application process and potentially enables you to secure higher credit limits compared to traditional business credit cards.

Key advantages of building with Ramp include:

• No impact on your personal credit score when applying for the Ramp corporate card
• An average net savings of 5% due to features designed to reduce business expenses
• Access to advanced expense management tools, including spending controls and real-time tracking
• Seamless integration with popular accounting software for streamlined financial management
• Ability to build a strong business credit history by making timely payments and maintaining a healthy credit utilization ratio

Ramp's all-in-one finance platform, with automated expense reporting, customizable spending limits, and real-time transaction monitoring, empowers you to make informed decisions and optimize your business spending. With Ramp, you can focus on what matters most—growing your business—while the platform takes care of the rest, ensuring that you build a robust business credit profile along the way.