When getting started as a real estate investor, you’ll typically need to rely on your personal credit history to obtain investment property loans. 

However, as you expand your portfolio, it’s a good idea to develop a business credit history so you can separate your business dealings from your personal finances and access even more capital.

How to Build Business Credit for Real Estate

Building business credit can take time, but it can have a significant impact on your real estate business. 

Using your personal credit history to apply for investment property loans may work at first, but over time, having multiple properties on your credit reports can limit your borrowing options.

Opening a business credit file and building a good credit history can help you shift some of the burden to your business, reducing your personal risk and giving you more options for commercial real estate financing. These nine steps can help you achieve your goal.

Step 1: Make Sure Your Business Is Incorporated

In order to build business credit, your company needs to be a separate entity from you. Setting up your business as a limited liability company (LLC) or incorporating it as an S corporation or a C corporation can help you establish that separation. 

The process for becoming an incorporation can vary from state to state, so check with your state’s chamber of commerce to get information about which documents you’ll need to provide and how to get started.

If you’re not sure about which type of entity to create for your business, take some time to research the different options and determine which is the best one for your business goals. 

You may also consider consulting with a tax professional who can help you make an informed decision.

Note that you can technically establish a business credit history as a sole proprietor, but you won’t get any of the legal protections an LLC or corporation provides.

Step 2: Set Up an EIN

An employer identification number (EIN) is necessary for building business credit history because it separates your business from your personal information. 

Business credit reporting agencies will use your EIN to identify your business, similar to how the consumer credit bureaus use your Social Security number.

This number will also be used as your tax identification number when you file your business tax return every year.

There’s no cost to obtain an EIN, and you can apply online through the IRS website. If you’re eligible, you’ll receive your EIN as soon as you complete the process. Then, you can start using it when setting up your bank accounts, opening your credit files, applying for credit, and more.

Step 3: Get a Business Bank Account

Once you have your EIN, you’ll want to open a business bank account using that number. This is another crucial step towards separating your business dealings from your personal finances. 

Having a business bank account adds legitimacy to your company, and lenders will note whether or not you have one during the underwriting process of a business loan. 

You may be tempted to just open a business bank account with your consumer bank, but it’s a good idea to take some time to research and compare multiple options. 

For example, some business bank accounts limit how many items, such as debit card purchases and withdrawals, you can have each month without a per-item fee. 

Others may offer interest on your balance, rewards on your debit card purchases, and other features to make your life easier and provide more value. 

Keep in mind, though, that some of these banks are online-only, which can make things more challenging if you plan to take rent payments in cash.

Step 4: Check if Your Business Is Listed With the Business Credit Bureaus

You can’t build your business credit history without business credit reports, which means you need to be listed with the major commercial credit bureaus, including Dun & Bradstreet, Experian, and Equifax. 

• Dun & Bradstreet: Start by looking up your business name in the company’s directory. If it’s not there, you can create a new DUNS number by providing key information about your business, including its name, location, contact information, and more. It typically takes 30 business days to receive the number.
• Experian: To get a credit file with Experian’s business side, you’ll simply need to work with a company that offers business credit and reports to the credit bureau. As you shop around for options, ask lenders which commercial credit bureaus they report to so you can make sure you’re on the right path. You can use a free service like Nav to see if you already have an Experian business credit report.
• Equifax: As with Experian, you’ll need to obtain credit from a lender that reports payments and other information to Equifax’s small business bureau. You can also use a free service like Nav to see if you already have an Equifax business credit report.

Step 5: Get CreditStrong

If you’re looking for an opportunity to build business credit without involving your personal credit score, consider a CreditStrong business credit builder loan. 

The loan works similarly to an installment loan but with some key differences. Instead of getting the loan amount upfront, it’s placed in a business savings account to secure the loan. 

You can pick a repayment plan of up to 10 years and make monthly payments, and CreditStrong will report your payments to Equifax, PayNet, and the Small Business Financial Exchange (SBFE). They also hope to soon report to Experian and Dun & Bradstreet.

Once you’ve completed your repayment term, you’ll receive the full loan amount to use however you wish.

You don’t need a business credit history to get approved for a CreditStrong business credit builder loan. However, you do need to have a business that’s at least three months old, with a U.S. location, and an EIN.

Step 6: Apply for a Business Credit Card

In addition to a CreditStrong business credit builder loan, it’s also a good idea to leverage your personal credit to apply for a business credit card. 

You won’t be able to use the card to buy an investment property, but you can use it for maintenance, repairs, and other expenses necessary to run your business.

Depending on the credit card company, your payments and balance will be reported to various commercial credit bureaus. 

Don’t just pick the first card you see, though. You’ll want to consider several different factors, including the card’s rewards program, sign-up bonus, 0% APR promotions, and business-specific perks and tools, to determine which one is the best for you and your company.

While most of the best business credit cards require that you have good personal credit — which typically starts at a FICO score of 670 — there are plenty of options available for business owners with lower scores.

In most cases, business credit card issuers don’t report any of your account information to the consumer credit bureaus unless you’re delinquent. However, some report all account information, so make sure you check reporting policies before you apply.

Step 7: Apply for Home Depot or Lowe’s Commercial Accounts

Both Lowe’s and Home Depot can be excellent resources for real estate investors, especially if you’re planning to make big improvements to a property before flipping it or renting it out. 

Even if you don’t plan to shop at Lowe’s and Home Depot regularly, it can be a good idea to open a commercial account with each retailer and put any purchases you do make on the accounts. That way, your payments will get reported to the major commercial credit bureaus.

Each account may also come with some extra perks. For example, depending on which Lowe’s business credit card you choose, you may get cash back, no interest for 60 days, extended terms, and other benefits. With Home Depot, you can get rewards or an early-pay discount.

Step 8: Pay Your Bills on Time

As with your personal credit history, it’s crucial that you pay all of your bills on time. 

In the event that your business can’t make its payments, contact your creditors to learn about your options before things get out of hand.

Also note that some business financing options may require a personal guarantee, which means that you’ll need to use personal assets to pay your bills if your company can’t. 

Step 9: Monitor Your Business Credit Reports

You should monitor your business credit reports just like you monitor your personal credit reports. However, there aren’t as many tools for monitoring business credit like there is for personal credit. 

It may make sense to pay the business credit bureaus for one-time access or even regular access to your business credit reports and scores.

It can take time to get started with building your business credit, but monitoring your reports will make it easier to track your progress and address potential issues as they arise.

The Bottom Line

Building business credit history is crucial for a real estate business. Not only can it help keep your business separate from your personal finances, but it can also make it easier for you to obtain credit without needing to rely on your personal credit score.

As you consider these steps, think about what makes the most sense for your real estate business. The process won’t happen overnight, but as you’re diligent about building your business credit, you’ll put your business in a better position for years to come.

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