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How to build business credit in 6 simple steps

A step-by-step guide to establishing business credit, plus how to check your rating at the major business credit bureaus in Canada.

One of the major things you can do to help your company’s financial future is establish and build your business credit. With good credit, you can more easily qualify for critical funding you might need.

Business credit is a record of a company’s financial responsibility. In large part, it gauges how likely a company is to repay borrowed money. Because of this, lenders will often consider business credit as one of the determining factors when making application decisions and setting interest rates.

The 6 steps to build business credit in Canada

Building business credit involves a few steps, but it can be relatively simple. Follow these instructions and you’ll be well on your way to getting your business credit scores.

1. Establish your business entity and essential details

The first step to getting your business credit is to legally separate your personal finances from that of your business. You can do this by establishing a sole proprietorship, a corporation, a partnership or a cooperative. If you’re not sure which to choose, read our guide on how to settle on the right business structure.

After you’ve chosen business’ structure, it’s time to get a few more details squared away before you can start building business credit:

  • Get a business number.
    This number acts like a Social Insurance Number for your business. It is a nine-digit number that helps streamline processes with the Canada Revenue Agency (CRA) and more. Banks will likely require this number when you apply for a business credit card. Registration is free — visit the CRA website to apply for your business number.
  • Open a bank account.
    You’ll need to get a business chequings or savings account and make sure you pay all business expenses from this account. Many banks offer complete business services that include access to bank accounts, credit cards, loans and more.
  • Get a business address and phone number.
    This will help you solidify your business as an entity. To establish your business credit, you’ll want your company to be listed in directories such as the Better Business Bureau (BBB) and the Yellow Pages. With a business phone number, you’ll establish a trade credit relationship with your phone line, which will be reported to the credit bureaus.

2. Open business credit files

You can begin building your credit history at the 3 largest business credit bureaus in Canada: Equifax, TransUnion and Dun & Bradstreet. Each evaluates your business credit by compiling information from legal filings, public records and creditors who work with you. Then, they give you numerical business credit scores — typically 0 to 100, with the higher end meaning higher creditworthiness.

You’ll want to establish credit files with each of them:

  • For Dun & Bradstreet: Register for a free D-U-N-S number, which is a nine-digit identifier that helps lenders and suppliers gauge your business’ financial stability. It’s what identifies your Dun & Bradstreet business credit file.
  • For Experian and Equifax: Simply open accounts with creditors that report to these bureaus. In time, your credit files will appear automatically.

3. Start building business credit

Here are two of the easiest and most common ways to start building business credit:

  • Open a business credit card.
    Get a credit card that reports to the business credit agencies and start making payments. This is one of the major steps in improving your business credit. Consider a business card for no-credit applicants if you have a limited credit history.
  • Establish tradelines with vendors and suppliers.
    Tradelines are credit accounts on your credit report, and they’re important because they give a history of your credit management. Work with your suppliers and vendors to establish relationships and build your credit. You can also ask them to report your payments to a business credit bureau. Dun & Bradstreet needs at least three tradelines to give you a PAYDEX business credit score.

Net-30 accounts — that is, those that give you 30 days to pay off purchases — are often good avenues to establish tradelines. These include vendors like Uline.

4. Pay on time and watch your credit utilization ratio

Each credit agency evaluates a different mix of factors when determining your credit score. However, one of the easiest ways to consistently grow your score is by making payments on time.

Late payments negatively affect your business credit. To avoid that, set alerts when payments are coming due or automate your credit card payments. If you consistently pay early and in full, Dun & Bradstreet will likely assign you a perfect score.

The balances you carry on your business credit cards can also affect your credit score. Keep an eye on your credit utilization ratio — that is, your balances relative to your total credit. The higher the ratio is, the higher risk credit agencies will assign to you defaulting on your debt. It’s generally recommended to keep your credit utilization ratio under 25% to 30%.

5. Borrow from lenders that report to credit bureaus

If you’ve got a perfect payment history, working with lenders that report to business credit bureaus can further help you establish your business credit. Before applying or a loan, check with the lender that your payment history will be reported to the credit agencies.

Also, try not to borrow more than you can pay off. Same goes for your credit card limit — don’t use it all at once if you can’t pay it off. With timely payments and responsible borrowing practices, your business credit will improve.

6. Maintain your business information and public record

Open new credit accounts responsibly, and pay off what you owe. Update your information with all three of the largest business credit bureaus since you don’t know which bureau a lender will pull your credit from.

Aside from payment history, credit bureaus keep public records, such as bankruptcies, liens and judgments. These records factor into your business scores as well, and can stain your business credit for up to 10 years. Avoid them as much as possible and you’ll help protect your fast-growing track record.

Compare business credit cards

One way to establish business credit is by opening a business credit card and making on-time payments. This shows creditors that you are likely a low-risk borrower, and they may be more willing to loan to you in the future. Below you can compare a range business credit cards on the market.

Name Product Purchase Interest Rate Cash Advance Rate Annual Fee Minimum Income call to action Welcome Offer
American Express Aeroplan Business Reserve Card
American Express Business Edge Card
BMO World Elite Business Mastercard
$0 annual fee for the first year ($149 thereafter)
BMO Air Miles No-Fee Business Mastercard
BMO AIR MILES World Elite Business Mastercard
$0 annual fee for the first year ($149 thereafter)
Business Platinum Card from American Express
20.99% - 28.99%
Marriott Bonvoy Business American Express Card

How does a business credit card affect business credit?

Most of your credit-building endeavors will revolve around paying your suppliers and vendors, paying your bills and borrowing from lenders. The easiest and most convenient way to manage this is to get a good credit card for your business needs.

With most business credit cards, you can:

  • Automate your payments
  • Set payment alerts
  • Manage and track your spending and the spending of your employees

Some business credit cards offer specific perks and features that can also help you build your credit, such as:

  • A low intro APR period on balance transfers, purchases or both
  • Payment flexibility with up to a 55-day grace period

Can a business credit card damage my business credit?

If you’re not careful, you can damage your business credit with your business credit card. This can happen when you:

  • Fail to make timely payments.
  • Default on your business credit card.
  • Carry too much debt.
  • Apply for too many business credit cards in a short period of time.

Be especially careful to evaluate your business’ health when considering a corporate card. Know the pros and cons of corporate cards before applying for one.

Why you should monitor your business credit reports

Your business credit is one of the primary factors that banks and lenders take into consideration when determining whether to lend you money. Much like checking your personal credit report, you’ll need to constantly keep an eye out for any errors or fraudulent activity on your business report.

If you find an error on your report, follow these steps:

  1. Check if the same error is on all three credit bureau reports.
  2. Next, double check if the data is accurate or if it’s an error.
  3. If it’s an error, reach out to the bureaus that list it and explain the issue.
  4. Provide proof that supports your claim.

Who scores my business credit?

There are multiple agencies that keep your credit score, but the largest three are:

  • Equifax. This bureau offers your credit risk score, which is meant to evaluate the risk of your company and its chance of failing within the next 12 months. Additionally, you can access industry and financial data, as well as your own personal data to make improved decisions.
  • TransUnion. TransUnion provide both personal and business credit scores. From your credit report, you can extract a variety of data including your business risk credit score and your trade data, which can all help in improving your decision making processes and your company growth. Business credit scores range from 400-800, with 400 being poor and 800 being excellent.
  • Dun & Bradstreet. You’ll receive three scores from Dun & Bradstreet: your credit score, a delinquency score and a financial stress score. These three scores respectively indicate your credit rating, your ability to pay your bills within 90 days and your company’s likelihood of shutting down completely. You’ll also receive a Paydex score which creates a snapshot of your bill paying habits. To get your scores, you’ll need a D-U-N-S number, which you can get for free on the bureau’s website.

Why is it important to have good business credit?

Your business credit score is an important track record, and it’s helpful to keep it high. With good business credit you’ll have:

  • An easier time with approvals. Your business credit score is one of the key factors that determine whether you’ll be approved. When you have a good credit score, you’ll have many lenders who are willing to work with you. This means you have many funding options.
  • Better payment terms with vendors and suppliers. A good credit score gives you leverage, as it means you’re a viable customer for many vendors and suppliers. You can use this track record to negotiate advantageous payment terms, giving your business better cash flow.
  • Lower interest rates from lenders and banks. Interest rates reflect the risk inherent in lending to individuals or businesses. Basically, lenders want to know there’s a good chance they’ll be repaid — and the lower that chance, the more they’ll want to be compensated for the risk. Because a good credit score implies your business is more likely to repay borrowed money, vendors and suppliers are more comfortable charging you lower rates.
  • Higher credit limits when applying for a credit card or loan.
    You’ll have more access to capital, as lenders feel more comfortable entrusting you with larger sums of money. This increased access to money can help you grow your business faster.

How to check your business credit rating

To check your business credit rating, you need to:

  1. Visit one of the business credit bureaus’ websites.
  2. Find your company. On the Dun & Bradstreet website, you need to provide your company’s D-U-N-S number, while on TransUnion and Equifax you’ll need to provide your business name and location.
  3. Purchase the report.

How to improve a low business credit score

  • Get your credit reports.
    The first thing to do if you have a low business credit score is to get a handle on where you’re starting from. Contact the three major business credit agencies. Then request your credit reports from these bureaus. Unfortunately, you’ll have to pay fees for this, but these may be well worth paying for important information.
  • Check your reports for any errors or hard inquiries that shouldn’t be present.
    Both of these can have a drag on your credit score. Contact your creditors and the credit agencies to get erroneous information removed.
  • Pay attention to the basics.
    Focus on two main strategies for fixing your credit: consistently paying your bills on time and keeping your credit utilization low. These factors have an outsize influence on your credit score because they indicate to lenders how likely you are to default on debt. Keep in mind you can improve your credit utilization by getting credit limit increases and opening new lines of credit — not just by decreasing your balances.
  • Consider opening new credit accounts with vendors and credit card issuers.
    This can help you gain positive history on your credit files. Consider business cards for fair-credit business owners, as well as business cards if you have bad credit. As always, check with vendors to see which business credit agencies they report your account history to.

Bottom line

Your business credit can determine whether you’ll get approved for a loan or credit card for your company as well as its interest rate. This is why you should start building your credit as soon as you start your company and continually strive to improve it. If you notice something’s amiss, contact the credit agencies and ask that the error be corrected.

If you follow these steps for building and establishing your credit – including applying for the market’s top business credit cards – you’ll likely be able to score lower interest rates and better loan terms for your business.

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