Does an LLC have its own credit score?

A limited liability company (LLC) has its own credit score, separate from the personal credit scores of its owners. This score is based on factors including a company’s payment history, credit utilization ratio, and length of credit history.

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

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In this article, we’ll explore the world of LLC credit scores and what steps you can take to build your company’s credit.

What is an LLC credit score?

A limited liability company (LLC) credit score, also known as a business credit score, reflects how effectively an LLC handles its payments. This score is determined by certain factors, including payment history, credit utilization, length of credit history, public records of liens and bankruptcies, and demographic information.

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Just like your personal credit score is connected to your Social Security Number (SSN), your LLC credit score is attached to your Employer Identification Number (EIN). While you can apply for business credit cards or certain business loans with an SSN, you’ll need an EIN if you want those financial activities to show up on your business credit report.

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. But if your credit card or loan has a personal guarantee, and you don’t make on-time payments, that may be reported on your personal credit report.

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Additionally, if you default on a business credit account after signing a personal guarantee, it will impact your personal credit. The lender can collect on the business debts from you personally and will typically report this default to personal credit reporting agencies.

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What credit score does an LLC start with?

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

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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 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.

The importance of building your LLC’s credit score

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

1. 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.
2. 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.
3. Increased credibility: A good business credit score can enhance your business's reputation and credibility with suppliers, vendors, and potential partners.
4. 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.

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Let's explore some key steps you can take to establish and improve your LLC's credit score.

1. ‍Apply for an EIN: Get an EIN for free online. This number is essential for establishing your LLC's credit.
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. Pay your invoices on time to build a positive payment history.
4. ‍Apply for a business credit card: Look for business credit cards that report to major business credit bureaus, such as Dun & Bradstreet (D&B), Experian, and Equifax. Use the card responsibly and pay your balances on time.
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 LLC's credit reports to ensure accuracy and identify areas for improvement. Address any issues promptly to maintain a strong credit profile.

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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.

What is a business credit score called?

Business credit scores go by various names, depending on the credit bureau that issues them. Some common business credit scores include:

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

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Each of these scores uses a different methodology and scale to assess your LLC's creditworthiness, so it's essential to monitor them regularly to get a comprehensive picture of your business's credit health.

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 credit reports, you can identify potential issues early, correct any errors, and make informed decisions about your business's financial future.

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To check your business credit score, you have several options:

1. Contact the three major business credit bureaus (D&B, Experian, and Equifax) and request your LLC's credit reports.
2. Use online business credit monitoring services, such as Nav or CreditSignal, which provide access to your LLC's credit scores and reports.
3. Check with your business lenders and suppliers to see if they report your LLC's payment history to the business credit bureaus.

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Although you may have to pay to access your credit reports, regularly monitoring your LLC's credit allows you to stay on top of its financial health and make proactive decisions to improve its creditworthiness.

What is a good business credit score?

A good business credit score typically ranges from 80 to 100 on the D&B PAYDEX score, which is one of the most commonly used business credit scoring models. For Experian's Intelliscore Plus, a score of 76 or higher is considered good, while a score of 90 or above is excellent.

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Similarly, an Equifax Business Credit Risk Score of 550 or higher is generally considered good. However, it's important to note that different lenders and vendors may have their own criteria for what constitutes a good business credit score, depending on the type of financing or trade credit being extended.

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

If you're looking for a powerful tool to help you build your LLC's credit score, consider the Ramp 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.

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With Ramp, you can:

• Save more by preventing out-of-policy spend: Preset controls on cards for specific vendors and categories, ensuring that your team stays within budget.
• Be free from expense reports: Easily submit expenses through SMS, mobile app, and integrations, streamlining the expense management process.
• Unlock savings in real time: Get insight into spend as it happens, with a platform that pays off immediately.
• Grow your business with the right terms: Enjoy rewards and perks, like 5% net savings on average, without personal credit checks or personal guarantees.

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Ramp's Business Credit Card puts money back in your pocket through cashback rewards, allowing you to invest even more in your business's growth. Plus, with access to over $350,000 in offers from Ramp's partners, you can take advantage of even more savings opportunities.