Establishing and Maintaining Your Business Credit

While personal credit can certainly be an asset to the business, overusing it can negatively affect the person’s credit score.

One of the biggest mistakes that new business owners tend to make is relying solely on their personal credit to fund the growth of their company. While personal credit can certainly be an asset to the business, overusing it can negatively affect the person’s credit report. Therefore, the safest and most beneficial way acquire business loans for companies big is small is by creating and maintaining a healthy business credit report.

Business credit is a lot like personal credit in the sense that a score is used to determine credit-worthiness. With personal credit, a report begins when the individual starts working, paying bills and applying for loans. The integrity of a personal credit report varies based on credit inquiries, debt payments and other such activities. A business credit report begins when a business owner applies for credit using the business’s name and federal tax ID number. The business credit report also varies based on credit inquiries and debt payments.

With personal credit, a continual report is sent to the national credit bureaus, and a score between 300 to 850 is given – a score ranging from 700 and above is considered healthy. And, with business credit, voluntary reports are sent by lenders to the business credit bureaus, and a score between 0 – 100 is issued – a score ranging from 75 and above is considered excellent. In order to establish a healthy business credit report, the business owner will have to build business credit and maintain its health and integrity.

Establishing and Maintaining your Business Credit:

  • Apply for a Federal Tax ID number: The first step to establishing a business credit report is to apply for a federal tax ID number, also known as an employer identification number (EIN). This number identifies a business, and it is also used by the company instead of a personal Social Security Number. A federal tax ID number can be obtained online from the International Revenue Service’s website. It is important that you establish your company as either a corporation or a LLC because establishing as a sole propitiatory entity will marry your personal credit information with your business report. With a corporation or a LLC, there is personal credit separation and liability protection.
  • Register your company: In order to generate a healthy business credit score you must register your company with the business credit bureaus.
  • Improve your personal credit: Before you apply for business loans it is highly recommended that you strengthen your personal credit report. The state of your personal credit report can either positively or negatively affect your chances of being approved for business credit with lower interest rates. To improve your personal credit, you must acquire your credit report from the credit bureau, determine your score and make the necessary steps to fix any negative issues. Seek the aid of well-reviewed credit repair company to help you determine the best steps to pay off any existing debts that you may have. A team of credit repair experts can also find any mistakes on your report and help you fix them.
  • Apply for loans: The next step after improving your personal credit report would be to apply for business credit from reputable lenders. Research the requirements of the lenders before applying for your business loans and walk prepared. Determine the amount of credit you will need, have all your paperwork ready, as well as your statements and business plans. Be professional, confident and honest. Ask any question that you may have before signing any forms and get a guarantee that the lenders send loan payment reports to the business credit bureaus.
  • Maintain a healthy business credit: Just like your personal credit report, it is important to maintain a healthy business credit report. Adhere to the FTC regulations, conduct healthy business practices and pay your loans in a timely manner. An excellent business credit report will be beneficial as your business continues to grow and expand.

Money is required to start almost any kind of business, and very few start-ups can afford to fund themselves – therefore, having an excellent credit report is imperative. Make the necessary steps to establishing and maintaining your business credit report so that you will always have a guarantee approved line of credit should your company ever need it.

Improve your credit company score

In addition to strengthen your personal credit score. It is also necessary to make sure you have a healthy business credit score.  Some tips to improve your company’s credit score are Set Up a Cash Reserve, Set Goals, Pay Your Bills Before They Are Due and Keep Track of Who You Owe money to.  You can find a full article on how to improve your company’s credit score on including more detail on each of these points and some additional ideas.

Ms. Career Girl

Ms. Career Girl was started in 2008 to help ambitious young professional women figure out who they are, what they want and how to get it.