How to Build Company Credit Not Based on Personal Credit

Building credit in the name of your business allows you to keep your personal credit separate from your business. However, don't expect to build business credit as fast as you built your personal credit. Credit lines for new business accounts are often tiny--sometimes as little as $100--as creditors monitor the progress of your company. As you apply for business credit, never include your Social Security number on the application. Keep everything in the name of the business and never personally guarantee any business credit cards or loans. Personal guarantees allows creditors to come after you if the company goes out of business or fails to pay.

Instructions

1

Establish a structure and name for your business if necessary. There are many business structures, with many entrepreneurs choosing to create their businesses as limited liability companies (LLC). The LLCs are perfect for keeping your business credit and personal credit separate. Do not create a sole proprietorship. Income from a sole proprietorship is included on your personal federal income tax returns and you could be held liable for any loans or credit cards taken out by a sole proprietorship that you own. Also apply for an Employer Identification Number--also known as a Federal Tax Identification Number--through the Internal Revenue Service (see Resources).

2

Open a business checking account and get a telephone number in the name of your business, if you haven't already done so. The checking account and phone number further establish your company as a legitimate business, making credit approval easier.

3

Apply for business credit. Fill out applications for credit using the name of the business and its physical address, which could be your house if it is a home-based business. Start small with gas cards or cards from office supply stores. Don't let low initial credit lines disappoint you. Keep balances low on the cards and never miss a payment as you build a credit history. Apply for more credit cards after a few months from other vendors and also use them responsibly.

4

Apply for a business credit card and business installment loan from your bank. The bank may ask you to personally guarantee the loans. Don't do that. Instead, offer to place money in a business savings account to serve as collateral for the credit card and loan. With the collateral in place approval should be easy. Keep a small balance on the business credit card and never miss a payment on it or the installment loan.

5

Use your existing business accounts to build your business credit history over about two years. Then start applying for other credit cards and loans without having to put up personal guarantees or collateral. Continue with a perfect credit history as you open accounts with much larger credit lines.