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What is business credit?

Business credit refers to a business entity’s credit reports and scores which are tied to its federal employer identification number (EIN). When a U.S. business wants to get credit for business purposes — such as business credit cards, real estate loans, equipment loans, and commercial auto loans — here’s how the process works:

  • The business must apply using its EIN. Some lenders also require a personal guarantee which requires an owner to provide their SSN.
  • Lenders use the EIN to check the business’s credit report, often with either Dun & Bradstreet (D&B), Equifax Business, or Experian Business (the main business credit agencies).
  • Business lenders assess a business’s creditworthiness along with other factors like revenue, time in business, industry risk, and existing debt to make an approval decision.
  • Upon approval, lenders open a credit account for your business. Reporting on credit accounts varies from lender to lender. Some don’t report at all, some only report negative information, and some report all information including on-time monthly payments.

You can build business credit by opening business credit accounts with companies that report positive information to one or more of the business credit reporting agencies. Over time, if you manage them responsibly, your growing credit can grant you access to more credit options and better terms. Additionally, the stronger your business credit, the higher the likelihood that you’ll get approved without a personal guarantee.

A tradeline on a business credit report refers to any credit account opened in the name of your business and reported to one of the three business credit agencies. These tradelines act as a record of your business's financial activity and how it manages credit.

Information included in a Tradeline
Each tradeline on a business credit report provides specific information about the account, such as:
  • The date the account was opened.
  • The credit limit or loan amount.
  • The account balance.
  • The payment history (including on-time payments, late payments, or other delinquencies).

Importance of Tradelines
Tradelines are critical for building a strong business credit profile and accessing financing for your business. They demonstrate creditworthiness through responsible management of your company's debt. The information from tradelines is used by the business credit agencies to calculate your business credit scores and ratings. A strong credit profile based on positive tradelines may make it easier to qualify for business loans and lines of credit or better terms with suppliers. 
 
Types of Business Tradelines
Business tradelines fall into two main categories:
  • Vendor Tradelines: These are credit accounts with suppliers offering payment terms.
  • Financial Tradelines: These include traditional financial products like business credit cards and loans.
 
How many tradelines are needed?
Generally, businesses need at least three tradelines and six months of credit history for the credit agencies to generate ratings and scores for the business. A company with too few tradelines and too little history will need more time to see its ratings and scores appear in their company's credit reports.