Do I need credit cards to build my business credit?

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,
I run a one-person marketing firm. I first financed my business with my savings. Ever since it has started making money, I've financed it with cash flow. I am not a big fan of using credit cards and usually pay by cash, check or debit card for business expenses and save the receipts for my tax records.

A friend said this is a big mistake and that I should be doing more to build my business's credit score. Should I be using credit cards?  I run the business from home and rarely have to travel to meet clients, so I don't have a lot of expenses. It is an LLC. -- Cathy

Answer Dear Cathy,
Don't beat yourself up. There are plenty of advantages to your approach.  One is that you don't have to pay interest on your purchases, as you would with a business credit card or business loan. You never need to worry that you won't be able to make your debt payments on time if a client pays you slowly. And if you avoid bank loans, you never have the hassles of filling out loan applications or selling a banker on how creditworthy your business is.

But there are some pretty big downsides, too. Your friend is correct in pointing out that if you rarely use credit cards at your business, it will be harder to build a strong credit score. That could work against you if you eventually plan to expand, using a bank loan. If you need to finance supplies at some point in the future, suppliers may also look at your business credit score.

While it's harder to build a strong score without using credit cards, it's not impossible. The first step is making sure you have a credit file with D&B Credibility, a credit rating bureau for businesses. To check that D&B is tracking your business you'll need a D-U-N-S number, which you can get for free.

Your credit score reflects far more than your credit card usage, and there are plenty of other steps you can take to build it. For instance, if you do business with large vendors whom you pay by check or through other means, they may report to D&B on your payment habits -- so paying them on time can help you improve your credit profile.

I should point out that a decision to use or avoid credit cards doesn't just affect your credit score. There are a few other things to consider.

To maintain the legal protections of the LLC, you should not use your personal money to pay for business purchases. If you continue to avoid credit cards, make sure you are diligent about using a check or debit card from a business checking account instead -- not from your personal accounts. 

Saying no to credit cards means you also have to be more scrupulous about holding on to your receipts. You won't have an end-of-year report documenting your purchases from a credit card issuer. For business owners who make cash purchases, I highly recommend using a mobile scanning app to electronically capture receipts on the go. That way you'll have a backup if the receipts flutter out of your wallet.

I'd also suggest looking at some of the business credit card rewards deals available to see if you would come out ahead by putting some charges on a business credit card. If you're planning to upgrade your computer or other technology this year, you may be able to rack up enough rewards points to pay for something else you need at your business -- or a plane ticket for your next vacation.

Also consider your growth plans. If you expect to hire employees at some point, you may want to reevaluate your reluctance to use credit cards. As more people come on board, you will need to come up with an organized system for them to make business purchases. Usually, getting them credit cards under the company name is the easiest route.

Of course, if you don't like using credit, your discomfort about borrowing may outweigh these other considerations. Every business owner is different, so don't let your friend sway you into doing something that you don't feel comfortable doing.

See related: How businesses can start on the road to credit, 8 steps to build your business credit profile, Financing your small business with credit cards: A capital idea?

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Updated: 03-24-2019