Building Good Business Credit After Bad Credit
By Gerri Detweiler
Can you establish good business credit if you have bad
personal credit? The answer is yes...but with a few caveats.
Business credit reports and personal credit reports are
generally completely separate databases for legal reasons.
However, there are some exceptions in terms of how
independent that information may be:
-- If you are operating as a sole proprietor or Limited
Liability Company, it is difficult to separate your personal
and business credit. A corporation is a much better
structure to build a completely independent business
credit report.
-- Experian sells a credit score that is a combination of
the business owner's personal credit history and the
businesses' credit history.
In the early years of a business, the owner will almost
certainly be required to personally guarantee loans.
However, as you establish a strong business credit rating
for your enterprise, you'll have more leverage to negotiate
for a loan without your personal guarantee.
A warning: some people try to use business credit file to
repeat bad credit habits. "I've seen people who ruined their
own credit go out and start a business, enlist the help of
people with good personal credit to be executives in the
company, and get major credit cards. They didn't have a real
product or service, and the objective was to just get
credit. They would inevitably default on the corporate
credit lines," says Erik Salmon, Director of Business Credit
Services for Innovative Business Services (IBS) and an
experienced business credit coach. If that's your intention
in establishing a business credit rating, you're better of
taking some personal finance courses to learn how to manage
your money.
If, however, you legitimately want to make a go of a
business, have a solid plan, and are willing to do what has
to be done to get it off the ground, then you should let a
bad personal credit rating stop you. Building or rebuilding
good credit - whether it's personal credit or business
credit - is a process. Be patient as you work on both your
personal and business credit. The results will be worth it.
About the Author:
Gerri Detweiler is considered one of the country's top
credit experts. She has been interviewed for thousands of
radio, television and print newstories including USA Today,
The Wall Street Journal, The New York Times, Dateline NBC
and many others. She has testified before Congress several
times and worked on reform of the national credit reporting
laws.
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