How Long Does It Take to Build Business Credit?
If you have a business, you need to think about business credit. Good business credit can open the door to financing, better supplier terms, and other financial advantages.
But how long does it take to build business credit?
Once you’ve established your business and taken out a few tradelines, you can build business credit. It may only take a few months for your business to begin generating a business credit score, but it may be several years before you can generate a good score.
In this article, we’ll look at how long it takes to build business credit and the steps you can take to build a good credit score.
How Long Will It Take Me to Build Business Credit?
Building business credit and the speed at which you can do it will depend on various factors, including your industry, your assets, the number of tradelines your business uses, how long you’ve been in business, and more.
There is a big difference between how long it will take you to begin generating a business credit score and how long it will take you to reach a good business credit score.
Business Credit Scores
Several different companies supply business credit scores. These are some of the most common.
- Tea Dun & Bradstreet PAYDEX Score.
- FICO‘s Small Business Scoring Service (SBSS) score.
- Tea Experian Intelliscore Plus.
- Equifax offers a payment index score, a credit risk score, and a failure risk score.
Each of these uses a different scoring system and a different rating formula.
📚 Learn more: What business credit scores each credit bureau offers and what you need to achieve a good score: What Is a Good Business Credit Score?
You Need Tradelines
You generate a business credit score when tradelines begin reporting to the business credit bureaus. Tradelines can consist of accounts with suppliers, utilities that your business pays, lines of credit, credit cards, lease agreements, etc.
Not all of these tradelines will report to the same credit bureaus. Each utility, supplier, and lender has a choice of when and how to report. For instance, a supplier may only report your account to Equifax and Experian or may report your account only once every 60 days.
And sometimes, a supplier or utility may only report delinquent accounts to the business credit bureaus. According to Experianout of 500,000+ suppliers, only roughly 10,000 are reporting credit account activity.
This can make establishing a business credit score difficult when you are just starting.
How Quickly Can I Get a Business Credit Score?
This depends on both your tradeline(s) and the credit bureaus. Not all tradelines will report at the same time to the same credit bureaus, and not all credit bureaus will process the tradeline information in the same timeframe.
The quickest business credit score to establish will likely be the FICO SBSS. This scoring model considers your personal credit, business assets, and business credit. That means you can generate an SBSS score even if you don’t yet have any business tradelines reporting.
The other business credit bureaus will not generate a score until tradelines begin reporting.
Once you’ve opened a tradeline, it can take 1 to 3 months for the account to appear on your business credit reports. And you’ll likely need a few months of reporting before the credit bureau will generate a score for your business.
For Dun & Bradstreet, you will need a DUNS number. The application process can set you back another 30 days.
Considering all of this, it can take upwards of 6 months for the credit bureaus to begin generating a credit score for your business.
How Long Will It Take to Get a Good Business Credit Score?
Generating a good business credit score could take as little as a year or as long as 3+ years.
This is because each business credit bureau has a unique scoring model that weighs business age, payment history, business assets, tradeline activity, and other factors differently.
A good FICO SBSS score meets the lender’s minimum lending requirements (140 for SBA loans). Since this scoring model factors in personal credit and business assets, even with limited business credit, you could generate a good SBSS score in less than 12 months, provided you have decent personal credit and good business financials.
Most of the other business credit scores are dependent on credit history. This includes payment activity, credit utilization, and more. The most tradelines you have reporting on-time payment and low usage creditthe quicker your score will hit that good threshold.
For these credit bureaus, you can achieve a good credit score in as little as a year, but on average, it takes 2 or 3 years.
Unfortunately, if you have high credit utilization, late payments, or a large number of accounts that aren’t reporting to the credit bureaus, then it might take you more than three years or more to hit the good credit mark.
Steps For Building Business Credit
When you begin building credit, there are a few steps you need to take to get everything set up properly.
The below steps guide you through what you need to do before tradelines can begin reporting to the credit bureaus and how to maximize the impact of those tradelines.
Step 1: Setup Your Business
This includes opening separate bank accounts and applying for an EIN.
Having a separate bank account (checking and/or savings) helps separate your personal and business finances. This will allow you greater accuracy in tracking your business finances.
Applying for an EIN can take as little as a few minutes (online) or as long as four weeks (by snail mail). Having an EIN helps to identify your business and protect you legally. This number will be required for most business credit applications.
Step 2: Get a DUNS Number
If you want to establish business credit with Dun & Bradstreet, you’ll need to apply for a DUNS number. This number is the unique number that Dun & Bradstreet uses to identify your business.
The application process for a DUNS number can take up to 30 days. If you need one faster, you can pay an expedited application fee of $229 to get your DUNS number in less than eight days.
Step 3: Open Tradelines
Once you have your EIN and DUNS number, you can then open lines of credit and other types of tradelines.
You’ll want to ask each company/lender which credit bureaus they report to and when since not all companies report account activity. If possible, you’ll want to get multiple tradelines reporting to each of the three main business credit bureaus (Equifax, Experian, and D&B).
Step 4: Pay Bills On Time
One of the biggest factors in business credit score calculations is payment history. In fact, the whole purpose of someone checking your business credit is to determine if you are likely to make on-time payments to them.
Payment history is one of the most important factors in business credit score calculations. In some business scoring models like Equifax’s Payment Index and D&B’s PAYDEX score, the focus is almost exclusively on payment activity.
Step 5: Monitor Your Credit
How do you know what your business credit reports look like if you aren’t regularly checking them? Monitoring your business credit is a great way to keep on track toward building good business credit.
Monitoring will also show you which tradelines are reporting and which aren’t. And it can help notify you of potential fraud so that you can nip it in the bud early.
Watching your credit score rise can also be very rewarding.
Tips for Building Business Credit Faster
If you are struggling to get new tradelines open, there are a few options you can explore to build your credit faster.
These subscriptions/accounts can help you get more tradelines reporting to your business credit, lowering your credit utilization while improving your payment history.
👉 Easy to get supplier accounts – companies like Staples, HD Supply, and Newegg offer business accounts to nearly everyone who applies. These accounts may come with low credit limits and poor terms, but they can help you when you are just starting out.
👉 Subscription accounts – accounts like Nav’s Business Boost add a tradeline to your report, along with helping you to monitor your credit. This tradeline often appears like a utility.
👉 Report tradelines yourself – D&B offers subscription accounts that actually allow you to submit your own trade references. So any open accounts you have with suppliers that don’t report to this credit bureau can be added to your credit report.
👉 credit builder loans – to help you improve your on-time payment history, you can open a business credit builder loan like this one from CreditStrong.
You can also look into other quick credit-building options like opening a secured business credit card, increasing the credit limit on existing tradelines, paying down debt, and more.
Build Business Credit With Patience
Building business credit is important, but it isn’t the sole mark of a successful business. Your assets, customer base, revenue, employees, etc., all matter too.
Attempts to build business credit quickly should never put your business too far in debt, nor should it damage relationships with your suppliers, partners, or customers.
While it can be frustrating, the best way to build business credit is to pay on time and have patience.