Establishing Credit With a New Taxpayer Identification Number
I wrote the other day about credit card signup bonuses for business credit cards (these cards are actually available to anyone, not just businesses, so have at it). Since we’re setting up an LLC for our online endeavors and are in the process of separating our personal and business income, a separate credit card to cover expenses seems to make good sense. But all of this got me to wondering…
How does one go about establishing credit under a new Taxpayer ID Number (TIN)? This doesn’t actually affect us directly, as we’re handling everything as a sole proprietorship, and are thus using my social security number (and associated credit history) for our new card. But what if you’re setting up a standalone entity? Presumably they’re going to run a credit check when considering your application, and it’s going to come up blank.
So what’s the best way to establish credit with brand new business? Maybe treat the new entity like a child coming of age, and get a joint credit card using your own SSN along with the TIN of the business?
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A few years ago, when I was in the same boat myself (cash/debit-only until my mid-twenties, no credit history at all), I opened up a money-market savings account, used that as a security deposit for a “secured card” for the first year (it was released at that point), and paid bills off to gain good credit *and* money-market-account interest in the meantime.
Comment by Eric — Nov 30th 2006 @ 3:18 pmMost of the “business card” sign up forms I’ve seen require both the EIN, and the SSN, and it clearly states that whoever’s SSN is given is responsible for the entire amount not paid by the company, just like a co-signer on a loan. I do think there are truly business-only cards out there where the business stands on its own as I’ve had a company card in the past for which I held no personal responsibility. I clicked on a least a couple of the cards presented in this post and they all appeared to be of the former variety.
Comment by ntguru911 — Nov 30th 2006 @ 4:12 pmOpps, one other thing ot think about. More and more cards with standard useful offers (e.g. 0 APR for 12 months) state in the agreement that if you default on any card through them all cards revert to default rates. My point is I think there are only a few real card companies out there and if you are like me and take advantage of the 0% APR for free money, you might want to get your company business card with another card company. That way, if you run into financial issues with your business, while you would still be personally liable for the amount due, a late payment or other issue wouldn’t cause your personal cards to default.
Comment by ntguru911 — Nov 30th 2006 @ 4:18 pmJust to add to what was already said, keep in mind that most cards, even if business or corporate cards are tied to your personal credit or SSN somehow.
I’ve been there, I have had corporations before, and so long as you are current on payments, no harm no foul. But even though it is through a separate EIN or corporate identity, if you missed a payment or are late, chances are when you signed for the card you personally signed for all credit obligations as well.
Bottom line is, be careful. Even though you setup a company to separate you from your business entity, chances are even though you get a “corporate” card or similar, in the event of a late payment or default you will be held personally responsible.
I’ve seen it happen before, where my personal credit is spotless, than my “corporation” misses a payment and suddenly that credit account which never showed up on my personal credit report before does show up and it shows a late payment.
Just be aware that your business accounts, even though they may legally be separate entities can still alter your personal credit.
Comment by Jeremy — Dec 1st 2006 @ 12:46 amI think Jeremy has a great point. In addition to tax advantages, liability protection is one of the primary reasons for forming an LLC. If you tie your business debts to your personal credit then you’re somewhat undoing that liability protection.
I think the best way to establish credit for a new business is utilize your relationship with your bank. If you’ve been a member for several years, they can look at the history and balances of your accounts and use that as justification in extending you a credit card. It helps if it is a smaller local bank and you’ve been a member for a long time.
Comment by moneysmartlife — Dec 1st 2006 @ 1:21 am“In addition to tax advantages, liability protection is one of the primary reasons for forming an LLC.”
Actually, there are no real tax benefits of an LLC in and of itself. That is, unless you opt to be treated as an S-Corp or C-Corp, your are still operating as a sole proprietor, and all income passes through to you own bottom line.
awesome site…I’m also in the process of forming an LLC. I would be nice to get a separate Tax Id to find all the credit cards bonus…do we go down the local courthouse for this tax ID?
Comment by Hustlermoneyblog.com — Dec 1st 2006 @ 10:35 pmHustlermoneyblog.com,
You get the Tax ID (called an EIN) directly from the IRS. I have done this several times for different businesses I’ve formed.
The IRS actually lets you apply online and they give you the number instantly:
https://sa.www4.irs.gov/sa_vign/newFormSS4.do
Comment by Alex — Dec 3rd 2006 @ 9:32 pmI just incorporated in the US (I am a Canadian citizen) so my new LLC has no credit history nor do I have a personal relationship with the American bank.
I have a great relationship with my Canadian bank but I am starting over financially in the eyes of the US banks.
Here is what I have done:
1. Set up my LLC
2. Opened a bank account
3. Acquired a secured credit card with a $500 limit
The secured card reports to the credit bureaus and I am on my way to establishing credit for my LLC.
Make purchases and pay your bill on time and within 6 months you have an established history and the banks will love you.
Comment by Crediteria — Dec 7th 2006 @ 4:35 pmIts all about starting off with net 30 accounts, places like staples/office depot etc will extend you credit with as little as a business phone line, or faxing in some paperwork(business license, articles of corp, utility bill etc).
you also need to get a dnb number, get the free one(for grants) and add that to all applications you fill out, once you have atleast 5 tradelines reporting, you obtain a paydex ranking (always pay your bills ahead of time, not just when they are due).
You can obtain anything you want without a personal guarantee, some will say no you cant, but do you think a real corp(like microsoft, walmart etc) gives a personal social security number to obtain lines of credit(not like they need credit but think about it)..
creditboards.com in the business section is a great place to start to learn, I have been reading there for a long time, and have alot of credit without any pg..
You can even get vehicles without a pg (takes time to build it up for the better lines, but staples and other net30 accounts are very easy and help establish your business)
Hope that helps some, to those who want to bash, you just are not in the know on this one. =)
Comment by Nextlevel — Apr 11th 2007 @ 1:46 pmSTAPLES STAPLES STAPLES!!! Thanks for extending my new business Credit!! Nextlevel, you were right on it!!! I didn’t even have to use my own SSN. I only used my TIN!! Yes!!! I’m well on my way!!
Comment by 2liveqdog — Apr 20th 2007 @ 10:51 pmCan anyone recommend 2 souces where one can obtain a business credit card (any type) with an EIN only ?
Thanks,
Comment by Vernon — Jun 20th 2007 @ 7:50 pmVernon
TRY DELL SAME AS STAPLES
Comment by Sally — Jul 8th 2007 @ 12:25 pmWow, I am so excited I stumbled over this webpage. It came up on my google search. Everything I have read on this webpage is terrific. Just a few days ago I was gonna pay $300 to get a company to help me find these creditors that relied solely on a TIN. Thank all of you for helping us new business owners find this information for free. Alot of time and money has been saved for your contributions. I too, hope to contribute in the near future. GREAT JOB. Keep it up!!!
Comment by Jesse — Jul 11th 2007 @ 9:08 pmI had a cleaning business in 2002, however I’m no longer doing that business. My personal credit rating is not that good…probably in the- “fair-bad” rating because of medical bills and student loans. I’m wanting to start another eBay business and of course thatwould have me working at home…is it possible for me to get another tax id (EIN) number for that business and attempt to establish credit for that company? Is it possible if I have my home address as business address since I would actually primarily be working from home, but have separate business telephone line. I need to establish credit with my eBay business so I can make purcahsesfor inventory to sell, and mailing supplies. Can I get another tax ID number with new business? If I can then I will go to Staples to establish credit…will I need to make sure Staples report credit to ratings to bureaus…Also Does Dell extend credit with just TIN number vs my personal SS number because I really don’t want to reply on my personal credit score because it’s not that strong to be honest. Thanks!
Comment by Michelle — Jul 18th 2007 @ 11:15 amHow does a person invest in the stock market without using their personal SSN? Can a person use a EIN/TIN only to open a stock market account under business name?
Comment by NewSFO — Nov 4th 2007 @ 10:35 amHello everyone, I wanted to start building credit for my business. I applied at Office Depot and got approved and I didn’t even have to use my SSN. I did try Dell but because my business had no credit history, they asked for a personal guarantee and my credit is not good. If anyone knows of any other places that you can apply using only my business info please let me know. Thanks, Lisa
Comment by Lisa — Dec 6th 2007 @ 12:45 pmBeware of business credit. There are two types: 1) SSN business credit that causes a inquiry on a personal credit report 2) corporate credit that commonly runs a DUNS or PAYDEX based on an EIN or TIN
Forget about 1) unless you want to do what you already did with the word business on the piece of plastic.
What matters is behind the scenes. When you hit the button, what computer makes the decision.
To get the best decision, you’ll need a PAYDEX score 80 or above AND you’ll need to avoid applications that require a Personal Guarantee which is a nice way of saying, SSN.
YOUR GOAL SHOULD BE TO NEVER GIVE YOUR SSN TO ANYBODY!!!
Comment by John Acheson — Dec 19th 2007 @ 3:22 amGo to creditboards.com to find out “how to do” everything you want for FREE!!!
Comment by John Acheson — Dec 19th 2007 @ 3:23 amI AM GLAD I FOUND THIS WED SITE I HAVE BEEN LOOKING FOR HELP FOR HRS AND NOT GETTING ANYWERE BUT BY JUST READING SOMTHINGS HERE I HAVE GOT MOST OF MY ANSWERS I HAVE ONE MORE AND I SEE A FEW PEOPLE ASKED IT. BUT NO ONE ANSWERED THEM YET WHAT ARE THE WED SITES OR COMPANYS THAT ME AND MY PARTNERS CAN GO TO AND GET UNSECURED CREDIT CARDS USING ONLY YOUR EIN ONE SITE SAYS “THERE ARE 40 COMPANYS THAT WILL GIVE YOU A CARD WITH OUT YOUR EIN” BUT THE WANT YOU TO PAY $300 FOR THE INFORMATION CAN SOMEONE HELP ME OUT.
Comment by nykalove4life — Jan 18th 2008 @ 4:45 pmCredit…
Interesting subject and wide open space, yet why is that, nobody talks about the good old simple “line of credit”. If I would to do business, I‘ll go with “line of credit”, you cannot miss a payment, you don’t have a time limitation of paying it off. Yes, you would start paying interest for every day of usage, but wouldn’t that be tax deductible (you have to ask an accountant for this one)? And save?
On the other hand having the 1+month time to pay an amount with no interest is a bargain, if you have the guarantee that you would have the funds to pay it back on time. Yet that is in the future and unforeseen events may put you in rather inconvenient position.
Soo… choice is yours and options are plenty. My suggestion is, have them both and use them accordingly. Good luck.
Comment by Nick — Feb 5th 2008 @ 12:56 amI would agree with John. Business is a separate entity; you don want and don’t have to use your personal SSN. That is why you create LLC, C- or S- Corp. To detach, separate yourself form your business. If your CC provider doesn’t like it is his problem, not yours. There are plenty CC issuers. You are not out of luck.
Comment by Nick — Feb 5th 2008 @ 1:17 amDoes anyone know a list of companies that will offer Net30 terms to new businesses?
Comment by Goalgetter — Feb 12th 2008 @ 10:04 pmCan anyone tell me which banks offer corporate credit without personal guarantee, tax id only?
Comment by Takiyah Sanders — Feb 13th 2008 @ 4:48 pmThanks for all the information you guys have posted. I actually had a call in to one of those companys that charge you to help build Bus credit….thanks to your info, I will disregard! =)
Comment by Deanna — Mar 7th 2008 @ 4:01 pmI am trying to establish my ein number and i am confused when i fill out the application for a business credit card, on the irs form with my info it has my name then my business name underneith. When filling out the application do i put my name anywhere or just the business name?
Comment by Meghan — Apr 7th 2008 @ 11:34 amMeghan: It depends on the application. Most have a place for your name and the business name. If your business has a name, enter that for the business name. If not (or if you don’t really have a business) then you can enter your name as the business name.
Staples Revolving Business Credit Card does not require a personal guarantee, but be prepared to show proof of your business in the form of a business license or utility bill in the business name.
Comment by Andrew — Apr 18th 2008 @ 4:28 pmJust go to Staples.com and apply to eliminate the provision of utility bill(s). Make sure you have your EIN, phone number and address handy.
Comment by Goalgetter — Apr 24th 2008 @ 10:51 pmI have tried every method noted above - My business has been active since 2006. I have applied at Staples, Office Depot and Discover. Each requested that I send them a copy of my business license. In the state I live in (RI) a business license is not needed since I am a consultant. I have the utility bills for the location I work out of and my business bank info but they still say its not enough. What can I do?? Someone help
Comment by Ruth — May 6th 2008 @ 3:27 pmHey Ruth,
If you are no required to have a business license, then call Staples, Office Depot & tell them that you don’t need one and it is not required for the type of business you conduct.
Usually they will try to verify your business number & address, send them something about you incorporating or your articles of organization if you formed a LLC.
All they want is some kind of business documentation saying that you have been in business.
Comment by Daniel — May 20th 2008 @ 5:04 pmWhen you use your EIN to apply for say staples
Comment by Steve — Jun 27th 2008 @ 3:52 amcard. Does your EIN still link to your SS# and
show up as a inquiry?
I am a single mother and student that would like to start my on business. How can I get started doing business using ebay?
Comment by Taura — Aug 1st 2008 @ 10:13 amSo I had my identity stolen and I work for a mortga ge company which is my parent company. I applied for a sole prop. EIN and I cant seem to establish credit with anyone. Everyone asks for my SSN which does me no good since I am in the process of trying to get a new SSN due to again identity theft. I don’t know what credit cards will accept me most haven’t and I can’t seem to get anywhere with this. Can anyone help?
Comment by AARIN Bailey — Aug 2nd 2008 @ 2:56 am