How Long Does It Take To Build Business Credit?

When you first set up your company you will naturally be keen to learn how to build business credit quickly. Finding a fast way to build business credit, will allow you to enjoy better benefits on your business bank accounts, apply for business credit cards, and increased lines of credit. However, if you want to know to build business credit fast, you may be in for a longer wait than you think.

When it comes to working to establish business credit, you will need to work steadily for a number of years while making sound financial and buying decisions.

How Long Does it Take to Build Business Credit?

It can take you three years or more to build up a good business credit profile that will support the financial growth of your company. With some creditors, you may be able to accomplish the same within one year. But the only way to do this is to steadily and reliably build up an excellent payment history which will be reported to business credit bureaus.

There are no easy shortcuts, but if you take the steps we have set out below, you should be able to develop a decent credit score in under five years.

Why Is It Hard to Build Business Credit Fast?

The majority of credit application companies will want to see a payment history of three years, to get a good idea of your spending practices, overall income, and how reliable your company is from a financial standpoint.

A three-year period will allow creditors to see if you are in the habit of being late on repayments, whether you have had any judgments against your company, and how steady your business is. Anything under this amount of time may not give them the data they need to make an accurate judgment.

Some creditors may require just one year of credit history to consider your company for a business loan, but this is by no means a common approach.

Why is It Important to Build Up Business Credit?

When you first set up your business, you can initially apply for business credit cards or a small loan for your company based on your personal credit scores. However, it is best practice to make sure that there is a clear delineation between your personal and business profile.

Building a Business Credit Score Helps You Access Better Benefits and Larger Loan Amounts

Separating your business finances will allow you to establish business credit for your company. A good business credit score will allow you to apply for a business checking account with better benefits.

It will also improve your company's chances of successfully applying for a larger credit limit or loan to support your business growth. You may also be able to access lower interest rates on a loan than companies with no or bad credit histories.

Protect Your Personal Credit Score from Business Debts and Liabilities

Separating your personal and business credit histories will also help you to protect your personal credit score. The debts and liabilities of the business shouldn't affect your personal finances and your assets shouldn't be at risk in most cases.

How to Build Business Credit

There may be no reliable fast way to build business credit, but there are steps you should be taking to make sure you know how to build business credit as quickly as possible. Get started with our tips below and make sure you are steady and responsible with your financial behavior.

The reason you may find it difficult to build business credit fast is that your credit score is reliant upon your business's track record. Information about whether you pay on time, open any credit accounts with merchants and suppliers, and what credit cards you open will all contribute to a reliable reflection of how steady and reliable your organization is.

Here are some steps you can take to make sure that you know the fast way to build business credit within a realistic time frame.

Make Sure Your Business Entity is Formally Set Up

You should make sure that you formalize your business finances so that you have a separate business checking account, and tax identification, and that you keep your personal and business spending separate.

This will ensure that your business is established as an entity and the personal credit history of the business owner isn't affected by company debts.

Make Sure You Keep on Top of Your Balance

Ensure that you keep on top on top of your monthly payments to ensure you don't dip into your overdraft or bounce any checks for face fees for overdue payments. This will not look good to future creditors.

Pay Your Bills Promptly

Utility companies and established vendors sometimes report to business credit bureaus. They will give information about how often you fall behind on your payments and whether you have any outstanding debt.

So, you need to make sure that you manage your budget to ensure that all owed payments are paid in full and on time.

Don't Hit Your Credit Limit

If you regularly spend up to your credit limit, this will increase your credit utilization score and will harm your business credit as a result.

Check Both Your Credit Card Report and Personal Credit Score

Creditors will sometimes also check your personal credit history when assessing your application. So, make sure you are confident that both your personal and business credit scores are healthy before you apply.

Apply for a Business Credit Card When You Have Built Up A Business Credit Profile

Once you have established a good record of business credit you should start to apply for a business credit card. You can first try this after one year, this may give certain creditors the information they need to make a decision.

If you have had difficulty paying the bills or staying out of the red as a new business owner, you should wait until you can look back on 12 months of prompt payments and no financial issues before making your application.

Summary: How Long Does it Take to Build Business Credit?

If you are looking to build business credit fast, you will need to reconcile yourself to the fact that you should expect to wait at least a year before you have built up an adequate payment history for creditors. However, there are tips for how to build business credit quickly within that period.

Responsible spending, financial organization, and making sure that you don't fall behind on payments are key if you want to discover the fast way to build business credit. You should aim for at least a year's worth of nearly impeccable financial behavior before you apply for your business credit card. This and the steps we have detailed above should increase your chances of success.