Why must you be concerned about your individual credit if you are going to build a powerful business credit score?
Let me be very understandable in correcting a myth that is hanging around the small business circuit. Business credit is not a exchange for personal credit. While a poor personal credit score will not stop you from establishing a business credit score, it will get in the way you from being permitted for bigger lines of credit.
Even when lenders decide to consider granting bigger lines of credit based on the business credit score, often, the personal credit score of the company’s owners will be researched to determine the character of the borrowers.
If your personal credit suggests that you don’t honor your monetary commitments and obligations, a lender can very well conclude that you will not honor your business commitments and as a result deny your application.
Lenders approve of business credit to accurately structured businesses not people. Ironically, it is people who are accountable for ensuring that the on loan funds are paid in a timely manner. The same lenders who will not approve your loan application if your business entity is not properly structured, will be the same lender that will require assurances that the owners of the company conduct financial affairs with integrity.
Again, it is probable to build a high business credit score with poor personal credit. So why is having bad personal credit a difficulty? The answer is that even when you set up a strong business credit score, your personal credit score may be a factor under the following circumstances.
1) A vendor purchases a full report on your company Dunn and Brad Street and it includes a profile of the company’s principals plus their personal credit score;
2) Often the administration members of a new limited liability company or the officers of a new corporation may still be asked by a selection of banks or lenders to be guarantors of business loans if there is not sufficient collateral for the loan;
3) Even while a business loan is granted based on business credit, having a good personal credit score demonstrates trustworthy fiscal management and adds credibility to loan applications.
4) Demonstrating both a business and personal history of sound economic practices, positions you to receive the best interest charge and cut loan fees.
5) It is not likely that you will get hold of considerable loans without having to at least use your trustworthy personal credit as a purpose of reference for your character when applying for larger loans.
If your credit report has blemishes or your score is lower than 650, there are steps that you can take to quickly get on the appropriate track. Start by utilizing the 4-6 month time frame while you are building your business credit score to resolve personal credit issues.
The company My Fico offers great tools to help you quickly build up your score.
Every principal with 10% or greater interest in the company should order their personal tri-merge credit report with credit scores from My Fico dot com. Here you’ll receive all three credit reports, all three of your FICO credit scores and 12 of your negative reason codes which can be used to begin at once increasing your score.The goal should be to preserve a personal credit score of at least 670 or better.
Remember, you can build a business credit score despite having bad personal credit, but it is forever in your best interest to have a peak business and personal credit score.
