subject: Is It Important To Raise Your Personal Credit Score To Establish Business Credit [print this page] Some business owners, especially the ones who are just starting a business, are often wondering why a personal credit score can help them establish business credit. Does your personal credit score needs to be good enough? Is it really needed to establish a separate credit history for your business? What if you have a low credit rating?
Your Personal Credit History and Your Business
If you have just started your business and you haven't yet established your business credit, lenders would use your personal credit history to determine whether or not your application would get approved. For instance, if you're applying for a small business credit card, the credit card company would first review your credit report before giving you the approval.
Hence, your chances of getting approved for business loans or credit cards greatly depend on the status of your personal credit history. Naturally, if you have a low FICO score, potential lenders would instantly regard you as a high risk borrower and may decline your application. Although there are lenders who do offer bad credit loans and credit cards for poor credit, these often come with higher interest rates and costs. On the other hand, an excellent credit score gives you the opportunity to get approved faster and enjoy the best deals.
Is it wise to wait first until your credit score improves before you submit any application for a loan or business credit card? If you can delay submitting your application at least for the next 6 months, working on your credit score would certainly make a big difference. By paying off your past due bills and by submitting your payments on time to your present creditors, you should be able to see a progress in your credit score after a few months. Yes, raising your personal credit can really make or break your plans of seeking business financing assistance.
Establishing Your Business Credit
Let's say that you've already raised your personal credit score and now you've been approved for a business credit card. What should be your next step? To establish a separate credit history for your company, you must first register with a business credit bureau. In the US, Dun & Bradstreet is the most recognize credit reporting agency for businesses and companies in the country. After signing up with D&B, the process usually takes only 30 days before your business credit report is officially recognized.
When building up your business credit, business credit cards are considered as powerful tools. The key to building and maintaining good credit is to be responsible about your debt obligations. As a borrower, it is your responsibility to abide by your credit card company's terms and conditions. This means, staying within your credit limit and submitting your monthly payments on time.
Strengthening your business credit is indeed a great preparation for the future. As your business grows and establishes itself in the industry, an excellent business credit history would be an enormous support in helping you obtain the financing assistance your company needs.
