Does an LLC have its own credit score?

A limited liability company (LLC) has its own credit score, separate from your personal credit score. Your business credit score is based on factors like your business’s payment history, credit utilization ratio, and length of credit history.

A good business credit score can open up a lot of doors, including better financing options, more favorable terms from suppliers, and increased trust within your industry. If you have bad credit, you might find yourself struggling to get the capital you need to grow.

We explore how LLC credit scores work, how to build LLC credit from scratch, and why it matters.

What is an LLC credit score?

An LLC credit score is simply a business credit score for your LLC. It reflects how effectively your LLC handles its payments. This credit score is determined by factors like payment history, credit utilization, length of credit history, public records of liens and bankruptcies, and demographic information.

Unlike a personal credit score, which is linked to your Social Security number (SSN) and used to evaluate you as an individual, your LLC’s credit score is tied to its Employer Identification Number (EIN). Lenders, vendors, and insurers use it to assess your business’s financial health.

Major business credit bureaus like Dun & Bradstreet (D&B), Experian, and Equifax use their own scoring models to calculate and report your LLC’s credit profile. Some of the most common business credit scores include:

• Dun & Bradstreet PAYDEX Score
• Experian Intelliscore Plus
• Equifax Business Credit Risk Score
• FICO SBSS (Small Business Scoring Service) Score

Each score uses a different methodology and scale, but they all serve the same purpose: helping third parties evaluate your company’s creditworthiness. It’s important to regularly monitor all relevant scores to get a complete view of your LLC’s credit standing.

Does an LLC affect personal credit?

An LLC generally won’t affect your personal credit score as long as you pay your business debts on time. However, if your credit card or loan has a personal guarantee and you fail to make on-time payments, this may be reported on your personal credit report.

If you default on a business credit account after signing a personal guarantee, the lender may collect the business debts from you personally and report the default to consumer credit reporting agencies like Equifax, Experian, and TransUnion.

To protect your personal credit, it’s essential to keep your business and personal finances separate. Use a dedicated business bank account, avoid mixing funds, and opt for credit options that don’t require a personal guarantee whenever possible.

What credit score does an LLC start with?

A new LLC starts with no credit score. Just like an individual, an LLC must build its credit over time by engaging in responsible financial behavior, such as taking out loans and business lines of credit and making timely payments.

As your LLC engages in financial transactions and builds a positive payment history, it will gradually establish its own credit profile. This can make it easier to qualify for higher credit limits and better business loans without relying solely on your personal credit.

How long does it take to establish credit for an LLC?

Establishing credit for an LLC can take anywhere from several months to a few years. Most sources estimate anywhere from 6 months to 3 years. Generally, the timeline depends on factors such as the type of credit you're seeking, your industry, and your LLC's financial stability.

Why building your LLC’s credit score is important

As a business owner, building a strong credit profile for your LLC is essential for several reasons:

• Access to financing: A good business credit score can help you secure loans, lines of credit, and other forms of financing to grow your business
• Better terms and rates: With a strong credit profile, you may be able to negotiate more favorable terms and interest rates on loans and credit products
• Increased credibility: A good business credit score can enhance your business's reputation and credibility with suppliers, vendors, and potential partners
• Personal asset protection: By building business credit, you can help separate your personal and business finances, protecting your personal assets in case of business financial troubles

How to build your LLC’s credit score

Building your LLC’s credit score is a gradual process that requires patience, persistence, and smart financial habits. Here are 6 key steps you can take to establish and improve your LLC's credit score:

1. ‍Apply for an EIN: This unique number is crucial for building your LLC’s credit and separating your business identity from your personal finances
2. Open a business bank account: Use your EIN to open a business bank account. Keep your personal and business finances separate to maintain the LLC's distinct credit identity.
3. Establish trade lines: Work with suppliers and vendors that report to business credit bureaus. Avoid late payments, which can hurt your business credit report and delay building a higher score.
4. Apply for a business credit card: Look for business credit cards that report to major business credit bureaus, such as D&B, Experian, and Equifax. Then, manage repayment responsibly to signal low risk.
5. Take out a small business loan: Consider taking out a small business loan and paying it back as agreed. This can help demonstrate your LLC's creditworthiness and ability to manage debt responsibly.
6. Monitor your LLC's credit: Regularly check your business credit reports to ensure accuracy and identify areas for improvement. Address any issues promptly to maintain a strong credit profile.

By following these steps consistently over time, you can establish a robust credit profile for your LLC, making it easier to access the financing you need to grow and succeed.

How to check your LLC's credit score

Monitoring your LLC's credit score is an important part of maintaining its financial health. By regularly checking your business’s credit reports, you can identify potential issues early, correct any errors, and make informed decisions about your business's financial future.

There are several ways to check your business credit score:

• Directly contact the three major business credit bureaus and request your LLC's credit reports
• Use business credit monitoring services like CreditSignal to access your LLC’s credit scores and alerts
• Check with your business lenders and suppliers to see if they report your LLC's payment history to the business credit bureaus

While some services may charge a fee, consistent monitoring helps you stay ahead of potential problems and strengthen your LLC’s credit profile over time.

Build your LLC’s credit score with the Ramp Business Credit Card

If you're looking for a powerful tool to help you build your LLC's credit score, consider Ramp’s Business Credit Card. Designed for modern businesses, Ramp offers a range of benefits to help you save money, streamline your finances, and grow your business:

• Prevent excessive spending: Set spend controls at the card, vendor, category, or department level, ensuring that your team stays within budget
• Free your team from expense reports: Easily submit receipts through text, mobile app, and integrations with Gmail and Amazon Business
• Monitor all your expenses in real time: Ramp’s real-time reporting gives you instant visibility into every transaction

Plus, you get access to more than $350,000 in exclusive partner rewards from vendors like UPS, QuickBooks, and AWS.

Try an interactive demo and see for yourself why businesses that choose Ramp save an average of 5% a year across all spending.