DUNS Number vs EIN: Which One Should You Get?
If you’re starting to explore the world of business credit, you might hear a pair of confusing acronyms – ‘DUNS’ and ‘EIN.’ Both are important for your business, and while there is some overlap they generally serve different purposes and can help your business achieve different tasks. So how do you make sense of the acronym alphabet soup, and which number does your business need?
When comparing a DUNS number and EIN, you’re more likely to find differences than similarities. Two major similarities? Each has nine digits and aids in building business credit. For your best chances at building business credit, your business should likely have both.
How The EIN Works
Your Employer Identification Number – abbreviated as an EIN – is issued by the Internal Revenue Service (IRS). It’s also known as your FEIN or Federal Employer Identification Number. While it has nine digits just like a DUNS number, the two are distinctly different.
An EIN identifies small business owners within the United States and is mainly used for tax purposes – similar to how a social security number identifies an individual taxpayer. It also demonstrates ownership of the business entity. As you could likely guess from the name, it also has a part to play when you begin to hire employees and pay related taxes.
An EIN doesn’t require significant validation besides a short application with the IRS where you’ll need a valid taxpayer identification number or SSN. After completing the application, you’ll get your EIN almost immediately. Then you can use it to:
- Open business bank accounts
- Apply for business credit
- Get permits for your business
- Hire employees
You might be surprised to know that even though your EIN is issued by the federal government, it can change under the specific circumstances. For example, if your business changes legal structures, your EIN might have to change along with the legal entity.
There’s one more unique element of an EIN – it’s not required for all business entities. While a sole proprietorship can get an EIN, they’re not legally required to have one. Even if your business structure doesn’t require an EIN it still may be helpful to have one if your goal is to build business credit.
Why You Need an EIN to Build Business Credit
Your EIN is a key requirement when applying for business credit cards, loans, grants, and other forms of small business financing. When you apply for credit using your EIN, lenders or vendors will report activity to business credit bureaus instead of personal credit bureaus, building a separate credit profile for your business.
Similar to how paying your build on time can ensure that your personal credit profile stays healthy, a business’ payment history and cerdit usage is reflected in your business credit scores.
The better your business credit history is, the more likely potential partners, suppliers, vendors, manufacturers, and lenders will be willing to work with you. They may even provide more favorable repayment terms such as net-30 or net-60 accounts.
How The DUNS Number Works
‘Data Universal Numbering System’ is kind of a mouthful, so ‘DUNS’ is used in its place. If your EIN identifies you as a business owner, then the DUNS number identifies the entire business.
Your DUNS number is a globally recognized identification number developed by the Dun & Bradstreet credit bureau. This unique number links your business to a D&B credit file.
This allows other business owners to verify your business’s legal status and credit history. It also helps you establish a business credit score. Ultimately, your business credit information is shared with potential partners, lenders, and suppliers to assess your creditworthiness.
There’s no escaping this one either. According to Dun & Bradstreet, your DUNS number is “persistent, consistent, and unique”. Unlike an EIN, it won’t change even if underlying elements of your business (like your legal structure) do.
To get a DUNS number you apply directly through Dun & Bradstreet. Dun & Bradstreet’s validation process is more complicated than registering for an EIN – while many register for an EIN while creating their business, Dun & Bradstreet is validating the existence of your business through multiple points before assigning a number. In some cases, they even contact your organization to verify certain credit reporting information is correct.
For this reason, it can take up to 30 days to get your DUNS number assigned after you apply.
There is an expedited process through DUNSFile that assigns you a number within five business days. Expedited service will cost $229, so plan ahead if you know you’ll be needing a DUNS number in the near future to save some money.
To make the process easier on yourself, come prepared with the following information:
- Legal Name
- Business name and business address
- Any ‘Doing Business As’ (DBA) registrations
- Phone numbers
- Business contact name and title
- Number of employees
- Physical address and/or mailing address
Since the DUNS number isn’t a government-issued identification number, you can’t use it to apply for business credit cards. For that, you’ll need to use an EIN, SSN, Individual Taxpayer Identification Number, or other taxpayer ID.
But it still helps you build business credit in other ways.
Why You Need a DUNS Number to Build Business Credit
Even though your DUNS number is connected to your business credit profile, you can’t use it to apply for corporate credit cards. Most card issuers require federally issued tax IDs to hold a personal guarantee for unpaid debts.
That doesn’t mean a DUNS can’t help you build business credit though.
Your personal credit is easy to handle compared to the nuances of business credit, and the credit profile of a young business is likely to be sparse – the first time you look at your business credit profile, you might see an “Insufficient information” notification and little or nothing else. It’s time to start building!
Once you have a DUNS number, any vendors, lenders, or businesses that share payment information with Dun & Bradstreet will begin reporting your payment activity. That’s when you begin building your business credit history.
Without access to your DUNS number and a Dun & Bradstreet profile, you may be leaving your credit history up to chance. Some suppliers and vendors might report your payments to credit reporting bureaus. But they’re under no obligation to do so. Other companies might not start reporting credit history until you establish a DUNS number.
Either way, getting your DUNS is the beginning of taking increased responsibility for your business credit history.
Other DUNS Number Uses
Your DUNS number doesn’t just come in handy for credit applications. It also paves the way for larger business opportunities.
Federal, state, and local government contracting require businesses to have a DUNS number to apply for contractor openings within the System for Award Management (SAM).
Apart from qualifying for SAM registration, the DUNS is also a requirement for many federal grants and other sponsored programs from the federal government. Some government grant applications won’t move forward without a DUNS number.
Your DUNS number also acts as a buffer between your business credit and your personal credit. Without one, your personal credit is used to obtain the financing needed to run your business.
This means falling behind on payments or having a high credit utilization rate on your business will impact your personal credit too. And rule number one is to keep your business credit and personal credit separate when possible.
Developing a solid business credit history under your DUNS number can earn you better repayment terms with vendors, suppliers, and manufacturers you work with. It’s similar to how personal credit works. If you prove you’re capable of paying your credit obligations on time, you’ll see benefits like:
- Lower interest rates
- Longer repayment periods
- Higher limits
Use CreditStrong To Build Business Credit
The main goal for most people looking to get their EIN or DUNS number is to establish their business credit. It’s a worthy objective with a potentially serious payoff down the road. However, it can be time-consuming for small business owners. But it doesn’t have to be.
As long as you have your free EIN, you can start building your business credit with CreditStrong’s business credit builder loan. A fast five-minute application is all it takes to get started and you don’t have to touch your personal credit.
Choose between interest-based or no-interest plans at a size that fits your businesses’ cash flow and credit building needs. Monthly loan payments help you build up to 25 months of solid payment history, and the principal payments build savings for your business over the term of your loan. CreditStrong reports to three of the five major business credit bureaus, which helps you boost your score and get the best credit cards and loan options for your business.
You may be interested in building credit and saving money, but you aren’t sure what to expect from a Credit Strong account. Building credit can be frustrating andRead More