When you first start a business, your personal credit usually does all the heavy lifting. Lenders, landlords and suppliers look at you, not your company, because the company has no history yet. Over time, building a separate business credit profile can help your company stand on its own and keep business activity from crowding your personal finances.
Building business credit takes patience and consistent habits. There are no shortcuts, and nobody can guarantee a particular score or approval. But the steps are straightforward, and many of them cost nothing.
Why separation matters
Mixing business and personal finances creates problems that grow with your company. Large purchases on a personal card can raise your personal credit utilization. Commingled accounts make bookkeeping messy and tax time stressful. And when a lender or vendor wants to evaluate your business, there is nothing to look at.
A separate business credit profile gives your company its own track record. It will not completely replace personal guarantees, especially in the early years, but it gives you more options as the business grows.
Step 1: Set up the business properly
Business credit starts with a real, recognizable business entity. In Florida, that usually means forming an LLC or corporation. Filing a Florida LLC with Sunbiz costs $125 in state fees ($100 for the Articles of Organization plus $25 for the registered agent designation). A for-profit corporation costs $70 in state fees ($35 for the Articles of Incorporation plus $35 for the registered agent designation).
Then make the business look established and consistent everywhere:
- Use the exact same legal business name, address and phone number on every application and listing.
- Keep a business phone number and a professional email address on your own domain.
- Check with your city, county and any state licensing agency about required licenses or a local business tax receipt.
- File your Florida annual report between January 1 and May 1 each year to stay in good standing.
Our business formation service can handle the filings and help you set up these basics correctly the first time.
Step 2: Get your identifiers
EIN. An Employer Identification Number is your business’s federal tax ID. The IRS issues EINs free of charge at IRS.gov. Be wary of websites that charge for one.
D-U-N-S Number. Dun & Bradstreet assigns D-U-N-S Numbers, which many suppliers and lenders use to identify businesses. Requesting one is free.
Use your EIN, not your Social Security number, on business applications whenever the form allows it.
Step 3: Open business accounts and use them
Open a business checking account in the company’s name and run all business income and expenses through it. This is the foundation of clean books and shows that your company operates as its own financial unit.
Next, look for vendors and suppliers who offer payment terms, such as net 30, and who report payment history to business credit bureaus. Ask each vendor whether they report before you assume they do. Start with purchases you would make anyway, then pay on time or early.
As your history builds, you may qualify for a business credit card or a small line of credit. Use credit lightly, pay balances on schedule and avoid opening many accounts at once.
Step 4: Keep your personal credit healthy too
Many lenders will still review your personal credit, especially for newer businesses. Keep an eye on it. You can get free credit reports from Equifax, Experian and TransUnion every week at AnnualCreditReport.com.
If you find an error, you can dispute it yourself for free, and the credit bureau generally must investigate within 30 days under the Fair Credit Reporting Act. Keep in mind that accurate, current, verifiable information cannot legally be removed, so be skeptical of anyone who promises to erase legitimate negative items.
Habits that build a strong profile
- Pay every business bill on time, every time.
- Keep your business information consistent across every record.
- Reconcile your bank account monthly so you always know your cash position.
- Review your business and personal credit reports regularly.
- Borrow for clear purposes, not just to build history.
Where we can help
Our credit repair and credit building services are provided through our partner, T and T Tax Services Inc. In line with federal and Florida law, you receive a written contract and a statement of your rights before paying, and you are billed only after the work is completed. No one can honestly guarantee a specific score, and we do not.
If you want a plan for separating your business and personal finances, book a free consultation or call (772) 356-3550.
