In today’s world we all have a number.  Every number associated with us, whether it is intentional or not, identifies us.  We have a Social Security number. We have loan numbers. There are PIN numbers. Even our phone number and street number can identify us in some way.  Because of this, when we want to build separate credit for a business, we have to get that business its own number. That number is known as an Employer Identification Number, or EIN.  You have to build business credit with EIN, not SSN.

Make Sure Accounts Report to Business Credit, Not Personal Credit, by Learning to Build Business with EIN, Not SSN

Before you can build business credit at all, you have to know what it is, and why you need it.  Maybe your personal credit is sufficient to run your business and you don’t think you need business credit.  Let’s take a closer look. 

What is Business Credit?

Business credit is credit that applies only to your business and its payment history.  It does not take into account your personal payment history or personal credit. It is a credit score based on the merits of your business alone, in your business name.  

Why Do You Need Business Credit? 

Regardless of what your personal credit looks like, you need business credit if you own a business.  Of course, this is obvious if your personal credit isn’t great. You need strong business credit to get funding for your business. 

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

What if your personal credit is great though?  Maybe you have already gotten some funding for your business based on personal credit, and you don’t see the big deal.  You didn’t need business credit to get that.  

The thing is, if you try to fund your business fully on the merits of your personal credit, your personal credit score will likely suffer even if you pay all your bills on time.  That’s because your personal credit score is affected by your debt-to-credit ratio. That is the amount of debt you have in relation to the amount of credit you have available. If you have $10,000 in credit available to you and a balance of $5,000, your debt-to-credit ratio is .5.  

The problem with running a business is that the expenses are much greater than personal expenses, by nature.  Personal credit accounts generally have lower limits than business accounts. This means that if you are trying to run a business on personal credit, your debt-to-credit ratio could stay high despite paying bills on time. That, in turn, will negatively affect your personal credit score. If you build business credit with EIN, you can avoid this issue and protect your personal credit score.

What You Need to Know About Reporting

To build separate credit for your business, two things have to happen.  First, your business has to be set up in a way that when you apply for credit for your business, those accounts report in your business name to business credit reporting agencies.  The way your business is set up also dictates whether those agencies recognize your business and record a score. If your business isn’t set up properly, those accounts will just report to your personal credit, even if you use the name of your business when you apply.

The next thing that has to happen is that you need to find accounts that will extend credit and report payments to the business CRAs without a credit check.  You need to be able to apply with only your business information, get approval, and have your payments reported. It is often difficult to get approval without a credit check. If they check your business credit initially, you will not have any.  That’s the goal right? You need to build business credit, but you typically need credit to get credit. We know a tip for how to get around this, and you have to build business credit with EIN to do it.  

How to Set Up Your Business to Build Business Credit with EIN

At the core, the only thing you really have to do to get an EIN is to apply for one here. It’s fast and free.  That’s not the whole story though when you want to build business credit with EIN. While the EIN is essential to building separate business credit, if you do not handle the other steps necessary, it will not do any good.  All the pieces of the puzzle have to be there for the picture to be complete. 

What are the other pieces of the puzzle necessary to build business credit with EIN?

Build Business Credit with EIN: Separate Contact Information

A business has to have its own contact information.  Sharing a phone number and address with the owner will not work when trying to build business credit. The owner’s phone number and address ties directly back to personal credit.  

It isn’t necessary to get a separate phone or even a location however.  You can use a VoIP business number that will ring to your regular number.  There are also virtual office services available that will give you a physical mailing address that you can use.  Many of these offer other services as well, such as live receptionist services and meeting spaces. 

Be sure to list your business contact information in the 411 directories.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

Build Business Credit with EIN: Incorporation

To build business credit with EIN, a business must formally incorporate.  It is the most sure-fire way to separate a business from its owner. Whether you choose to incorporate as a corporation, s-corp, or LLC will depend on a couple of things.

First, any of these options work to help build business credit with EIN.  However, they offer different levels of protection and cost. For example, organizing as a corporation will cost the most, but it offers the most liability protection.  An s-corp is a little less costly, but it also offers a little less protection. If you choose to become an LLC you will have the least liability protection but it also is the least expensive option.  Choose the one that fits your budget and liability protection needs the best.

Build Business Credit with EIN: Get a D-U-N-S Number

Dun & Bradstreet is the largest and most commonly used business credit CRA.  The problem is, if accounts are reporting your payments to D&B and you do not have a D-U-N-S number, it will not do any good.  You have to have this number to have a credit file with Dun & Bradstreet. 

Build Business Credit with EIN: Open a Business Bank Account

This is huge for a number of reasons.  First, those accounts that will offer credit without a credit check often want to see a dedicated business bank account with a minimum balance.  Second, it helps keep business and personal expenses separate for tax purposes. 

Be sure to use your EIN and business contact information when you open the account.

Build Business Credit With EIN: Get Accounts Reporting

Once you have an EIN and you have taken the other steps necessary to set up your business as separate from you as the owner, it is time to get accounts reporting to the business credit agencies.  This is where the EIN gets put to good use.  

There are certain vendors, called starter vendors, that will extend net 30 terms without a credit check.  They will also report those payments to the business CRAs. The trick is, you need to set up accounts with them using your business information, including using your EIN and not your SSN.  If you put your SSN on there things could get confused and the payments may report to personal credit rather than business credit. 

We call this the vendor credit tier.  Go here to find out more about the credit tiers and starter vendors. 

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

Build Business Credit with EIN: A Word About Credit Cards

After you work through the business credit tier, it will be time to apply for business credit cards in the other tiers.  You can find out more about the process and the other credit tiers here. However, you may need to use your SSN for this anyway. Mostly it’s for identification purposes, but sometimes they want to check personal credit as well.  This is because most credit cards require a personal guarantee even for business cards. That doesn’t mean that those accounts will end up on your personal credit report, but until your business credit is strong enough from working the process, your personal credit could affect approval.

There are a few cards, however, that do not require a personal guarantee.  

Business Cards That Do Not Require a Personal Guarantee 

Brex Corporate Card

This card is a stand out.  It isn’t connected to a specific retailer so it is much more flexible than other business credit cards that do not require a personal guarantee.  In addition, you can earn rewards! Specifically, you can earn one point per dollar on purchases. You can also get credits and discounts on certain services . 

One condition is that you have to pay the balance in full each month.  It isn’t revolving credit in the traditional sense. You cannot carry a balance. 

Even though they do not require a personal guarantee, Brex knows exactly what it is looking for in a cardholder. They want innovative businesses that use modern technology. In addition, they want to see a healthy business specific bank account.  It is best if it maintains a balance of $100,000 or more.  

The Brex Corporate Card has no annual fee.  It also offers other reward levels based on the type of spending, in addition to the 1 point per dollar spent on regular purchases.  These include: 

• 7x points on taxis and ridesharing services
• 4x points on flights, AirBnbs, and hotels when you book with Brex
• 2x points on software purchases that are recurring

There is an introductory offer of 30,000 bonus points and card fees waived for life after approval. Other perks include credit for ZenDesk and Amazon Web Services.  There are discounts on WeWork and Salesforce also.

In addition to a business bank account with $100,000 balance, they also want you to have an EIN.

Bremer Bank Visa Signature Business Company Card

The Bremer Bank Visa Signature Business Company Card is an actual business credit card that has no personal guarantee.  It also has high income requirements and still prefers to work with medium to large businesses.  If you are able to get one, you will enjoy no annual fee and a rewards program. 

To qualify, you must have at least $1,000,000 in annual revenue and $350,000 in net annual income for the previous two years. 

Shell Small Business Card

The Shell Small Business Card is only good at Shell gas stations, and it offers no rewards.  The best thing about it other than it being one of the few business credit cards that does not require a personal guarantee, is that it can be a nice tool for employees on the road a lot.  It offers options such as purchase limits and specific station limitations.  Also, it can be a convenient tool for companies with employees who are always on the road. There is no annual fee, but cardholders have to be associated with a government entity, nonprofit, or earn at least $1 million annually for the past 3 years. 

Sam’s Club Business Mastercard

Surprisingly, the Sam’s Club Business Mastercard is one of the more flexible options for business credit cards that do not require personal guarantee.  You are not limited to using it only at Sam’s Club. In fact, you can use it anywhere they accept Mastercard.  It also offers great rewards on gas, dining, and travel.  

There is no annual fee, but you do have to have a Sam’s Club membership.  Currently, you get a $20 statement credit if you spend $50 or more at Sam’s Club the same day you open the card.  Rewards include 5% cash back on gas up to $6,000 in a year. After that, you get 1%. There is also a 3% cash back on dining and travel rewards, and 1% on all other purchases.  

To get this card, the business must make $5 million or more per year.  It also must be in operation for at least 2 years and have more than 10 employees for there to be no personal guarantee requirement. 

Office Depot OfficeMax Business Credit Account

Similar to the Shell card mentioned above, the Office Depot OfficeMax Business Credit Account is not known for its flexibility.  It is only good at Office Depot stores, officedepot.com, and OfficeMax.  They do not offer rewards, but there is an introductory bonus. If you spend at least $150 in the first 60 days after opening the account you get a $50 statement credit.  

It is Possible to Build Business Credit With EIN, You Just Have to Know Where to Start

You have to use your EIN, not your SSN, to build business credit.  You cannot have separate business credit if you keep applying for credit with your SSN.  Your business has to have its own identifying number. That’s the EIN. While this is the only step necessary to build separate credit, it is a necessary step.  Without and EIN, the other steps will make no difference at all. 

After you have your EIN and your business set up as a separate, fundable entity, look for those starter vendors that will issue credit and report payments to build your score.