Business or personal credit: Which can be built faster?

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question Dear Your Business Credit,
Which is quicker to build -- business or personal credit? -- Cameron

Answer Dear Cameron,
There's no ultrapowerful Orion spacecraft when it comes to building credit, but generally speaking, you will be able to build personal credit faster than business credit. There are fewer steps involved in building personal credit.

Let's say you have no personal credit right now or it is very limited. Getting a personal credit card and using it responsibility can propel you ahead. For people who cannot get a traditional credit card, secured credit cards can be a good way to build a credit history. See "7 questions to ask when choosing a secured credit card" for more help in choosing a secured card.

There are other ways to build personal credit, too, including certain kinds of loans. Even paying your rent on time could help if your landlord reports your payments to one of the two credit bureaus (Experian and TransUnion) that include rental payments in the credit reports they issue. 

There's more legwork involved in building business credit, especially if you do not already have a separate business entity set up.

To build business credit, Experian recommends you take these four steps:

  1. Incorporate or form an LLC to make sure your business is seen as a separate business entity.
  2. Get a federal employer identification number (EIN).
  3. Open a business bank account in the name of your firm.
  4. Set up a dedicated phone line for the business and make sure it is listed. These projects take time and money so many business owners prefer to tackle them gradually.

Once you have formed a business entity, opening a business credit card in its name will help you build your company's credit history. Some of your suppliers probably offer trade credit lines, as well. They can contribute to your credit history.

Applying for a free DUNS number through D&B Credibility, a credit rating bureau for businesses, can ensure that this type of activity is being tracked by the firm, whose reports are used by many banks to check credit. Also make sure the other major credit bureaus track your credit. (For information on how, see "Business loans from banks: 5 ways to boost your approval odds").

If you are asking this question because you are trying to decide which form of credit to build first, I suggest moving forward on both fronts simultaneously.

For one thing, building personal credit will add to the borrowing options for your business. Business lenders often require a personal guarantee for small business credit cards or bank loans.

Secondly, separating your business and personal finances can help you avoid problems with the Internal Revenue Service. Doing so makes it much easier to keep accurate records.

It can also help you protect your personal assets. If you have formed an LLC, the LLC can shield you from personal liability from your business's debts but only if you maintain it correctly. Commingling your finances suggests you and your business are one and the same and therefore undermines the protections of the LLC.

Building both business and personal credit may sound like a lot of work but the good news is you don't have to tackle it all overnight. Put one step on your to-do list every month and you'll be amazed at what you can accomplish in a year. Even a small step, such as opening a credit card and paying your bills on time, can make a massive difference in building credit.

See related: Keeping business credit off your personal record, Rebuilding credit to run your new business

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Updated: 02-22-2019