How to Build Business Credit with Bad Personal Credit | Fora Financial
How to Build Business Credit If You Have Bad Personal Credit
September 03, 2021
How to Build Business Credit with Bad Personal Credit

How to Build Business Credit If You Have Bad Personal Credit

Business credit is important for a number of reasons. With a good business credit score, you’ll find it easier to obtain financing with lower interest rates and more favorable terms. You can also land better deals with vendors and suppliers. In addition, strong business credit may protect your personal credit score.

If you have bad personal credit, rest assured you can still build business credit. Although it may be challenging, it’s certainly possible.

In this blog post, we’ll explain how to build your business’s credit profile despite a poor personal credit score. We’ll also explain why having strong business and personal credit can be beneficial to your company’s future.

Is Your Business Credit Different From Personal Credit?

If you’re a small business owner, you have business credit and personal credit. Your FICO personal credit score is based on five factors:

  • Your payment history
  • Credit utilization
  • Length of credit history
  • Credit mix
  • New credit

Business credit, however, works differently from personal credit history. It considers how long you’ve been in business and your business payment history. Business credit also looks at your history with Dun & Bradstreet, Equifax, Experian and FICO.

How to Build Business Credit :

If you’re a new business owner and want to focus on establishing your business credit history, you’ve come to the right place. Here are some tips on how to build business credit, even if your personal finances aren’t steady.

1. Establish an EIN

If you don’t have an Employer Identification Number (EIN), it’s time to establish one. It can give you an alternative way to apply for business credit lines.

With an EIN, you can also open business checking account and savings account. In addition to an EIN, it’s a good idea to establish a physical address and separate phone line to legitimize your business entity.

We also suggest opening a business bank account and only using it for business expenses; mixing business and personal costs can make accounting methods very challenging.

2. Sign Up with Dun & Bradstreet

Dun & Bradstreet is a bureau that provides information on business credit and reports on businesses. You can apply for your nine digit D-U-N-S number for free to start building business credit right away.

3. Use a Business Credit Card

With a business credit card, you can begin to establish your business credit history. Just make sure that you pay your credit card bills on time and in full so that the credit card company will report positive behavior to the credit bureaus.

Note that you may need a personal credit check and personal guarantee to get approved for a business credit card. In the event you don’t qualify for a traditional business credit card, opt for a secured credit card or retail credit card at a store your business frequents.


4. Apply for a Working Capital Loan

Some business loans are easier to obtain than others. If you don’t have the best personal credit, a working capital loan may be a viable option. It can help you finance your day-to-day operations and cover your short-term financial needs.

By making timely payments you’ll find that your business credit score will increase. Plus, you’ll still have access to ample cash flow to grow your business.

5. Check Your Business Credit Reports Often

It’s important to keep a close eye on your business credit reports so you can stay up-to-date on where your business’s credit stands. You may also catch errors and inaccuracies that take a serious toll on your credit.

If you have a bad business credit score, it can be challenging for you to get approved for additional financing, and may deter lenders from working with you. Therefore, you should work to improve it should you find that your score is poor.

How to Improve Your Personal Credit Score:

If you improve your personal credit score, you’re more likely to get approved for business loans and avoid higher interest and insurance rates. Some of the best ways to strengthen your personal credit include:

1. Make Payments on Time

Since payment history plays a large role in your personal credit, it’s important to pay your bills on time, every time. Even one missed payment can affect your credit score, and it can be difficult to reverse.

If you’re worried about missing payments, enroll in automatic payments or set calendar reminders on your phone. That way, paying your bills on time will become a part of your monthly routine, and you won’t risk late payments.

2. Check Your Credit Regularly

You can go to to check your personal credit reports for free once a year. Review them often and search for errors or inaccuracies. If you find any, be sure to file disputes as soon as possible to resolve them.

3. Keep Credit Balances Low

Financial experts recommend that you keep your credit card balances to no more than 30% of your available limit. For example, if you have a business credit card with a $3,000 limit, make sure it doesn’t exceed $1,000.

4. Only Apply for Credit When You Need To

It can be tempting to apply for new credit whenever you want to buy something. Since this can hinder your credit score, only apply for credit accounts when you absolutely need to. Don’t rely on credit to fund your lifestyle, because overspending will lead to a lower score.
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What is a Good Business Credit Score?

Every lender has its own criteria for what they consider good business credit. In most cases, however, lenders prefer business credit scores that are higher than 75. Some lenders may have more lenient requirements, especially for startups or newer businesses.

If you’re unsure of what credit score you need to obtain a business loan, check out the lender’s website. You may also get pre-approved and find out if you’re eligible before you go through the formal application process.

Conclusion: You Can Build Business Credit with Bad Personal Credit

A good business credit score can put your business on the path to success. That’s why it’s important to build it, even if you have a bad personal credit score that you’re also trying to increase.

Once you’ve improved your business credit score, make every effort to maintain it. By doing so, you can save thousands upon thousands of dollars over the lifespan of your business.

Editor’s Note: This post was updated for accuracy and comprehensiveness in September 2021.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].