Great personal credit score? Check. Now let’s discuss your business credit.
As an entrepreneur, you are responsible for running an entire business and for the paychecks of several people. Trust us, with so much to look after, you don’t want to fall behind in the credit department.
The good news is, building good business credit is simple and maintaining it is even easier. All you need is the right mindset and determination.
First A Bit About How Business Credit Works
Much like your personal credit score, business credit works to create trust between you and a potential lender or supplier. It will also influence interest rates, insurance premium, and credit extensions.
It tells others how much of a financial risk it would be to lend you money if you request for it. Business credit reporting agencies receive reports from lenders you have been in business with. Based on that history, they score your credit.
Now that we’re up to speed, it’s time to answer the big question.
How can you build your business credit and maintain it consistently?
Business Credit 101: Building Good Credit History
Registration as a separate business entity
Why should you do this? Each time your company conducts a business transaction it should be reflected on your official business account instead of your personal one. This way, credit reporting agencies will receive your business reports making you eligible for better credit accounts.
Some of the options you have when establishing yourself as a separate business entity are S Corporation, C Corporation, and Limited Liability Corporation.
Ensuring Credit Reporting Bureaus Have Latest Information About Your Business
In the United States, there are many credit scoring agencies that collect and score financial information. Unless it is the standardized FICO rating system, the agency you register at will be following its own method of rating you as a business entity.
Tips For Maintaining Credit
This goes without saying, but you’d be surprised how much of a challenge this is for some business owners.
If you want to maintain an impressive credit score that you can show off, make your credit and loan payments on time, every time. This shows rating agencies that you are responsible for your cash flows.
Stay On Top Of Your Personal Credit
Business credit scoring models like those offered by Equifax, Experian, and FICO, incorporate the business as well as personal credit data. Although it is advised to maintain distinct commercial and personal credit accounts, you shouldn’t ignore one at the expense of the other.
Simply put, if you neglect your personal credit, it’s bound to reflect badly on your business credit score too. This is especially true for new start-ups that have little or no credit history. Credit scoring agencies will naturally make their assessment on the basis of your personal debt.
It is your duty to keep abreast with your business reports rating agencies to receive and correct any discrepancies.
If you feel like you could use a little professional help in getting your credit score where you want it to be, there are affordable business credit building services available near you.
Sign up today to build your business credit!