How to Build Corporate Credit Without a Personal Guarantee

When starting a business, it is important to keep your business credit separate from your personal credit so that your personal credit score does not drop due to the sudden surge in credit checks and other issues brought on by the new business. By building corporate credit without using a personal guarantee, you can start a business credit profile that reflects your financial success in the business world without affecting your personal situation. In order to build up your corporate credit in this fashion, follow these steps.

Instructions

1

Incorporate your business. First, you must incorporate your business as a corporation or a limited liability company (LLC) to keep you personally insulated financially. The corporation or LLC will have their own Employee Identification Number (EIN) which is used to run credit checks, just as a person's social security number is used for personal credit. You can apply for an EIN on the IRS website (see References).

2

Create a business plan and budget. In order to build corporate credit, you must start out on the right foot. Write a business plan that shows your goals and five-year projections, as well as the amount of start-up capital needed. List your financial resources including a personal loan to the company or bank loan. Set a budget that allows you to achieve your projected goals while staying within the company's projected means.

3

Register your company with Dunn & Bradstreet. As the major business credit bureau, any prospective lender will check your company's credit profile with Dunn & Bradstreet (D&B). (See References for link.) To gain your D&B number and start your credit profile, you must register and pay a fee. Although a fee of $300 to $400 in 2009 may seem like a significant expense for a small new business, it is essential to register in order to be taken seriously when applying for business loans.

4

Show that your company is legitimate. Be sure to abide by what credit markets require and show lenders that your company is true and blue. Publish your contact information in the yellow pages, lease an office with a phone and fax line, open checking accounts, and keep detailed financial records. Also be sure to have all permits and licenses necessary to operate your business and keep your business status current with your state's division of corporations.

5

Be smart with your credit. Just as you can take certain steps to ensure your personal credit remains at a good level, take action to raise your business credit. Request a higher credit line on credit cards, pay down your credit card balances or credit line, make sure to pay all bills on time, and prevent debt from creeping up on you due to mere inattention to your company's finances. To find out more about what factors affect your credit rating, visit MyFICO (see Resources).

6

Report credit experiences to the Business Credit Bureaus. D&B, along with the other business credit bureaus Experian and Equifax keep track of your business credit experiences, but they don't do so in a timely manner and they can miss important positive actions regarding your credit. When you take out a credit line or loan and make timely payments, this is newsworthy for your credit profile, so be sure to report these actions to the business credit bureaus. (See Resources for links to bureaus.)