Understanding Business Credit vs. Personal Credit
Personal credit is what you build by showing trustworthiness when it comes to paying your bills on time and in full, from credit cards to automobile loans to home loans. Doing so increases your credit standing. Your credit is important to keep at a good standing for several reasons. Understanding business credit will help achieve these goals.
However, it’s important to remember your personal credit should be separate from your business credit. Typically, when we start a business, we must use our personal credit to get the loan to start the business. You can start building business credit as soon as you have a separate business bank account.
Understanding business credit is very important. One thing to note about business credit is that in addition to their personal credit score, they have a business credit profile. Business credit is a compilation of many different scores by different bureaus, which sometimes reflects information differently. Lenders look at all these bureau reports to evaluate if they are willing to complete the funding deal.
Building Your Business Credit
The first step to building credit is to check if your business even has credit. This will help in understanding your business credit score and where you currently stand. Building your business credit is very much the same as building your personal credit. The catch, is that your business credit relies on your personal credit to be in good standing in order to have good credit. Spending on business credit cards, paying bills on time, and growing cash flow will all help raise your credit.
Some important components that are part of your business credit profile include:
· Payment History: this is with a series of detailed information like business credit cards, accounts with utilities, banks, suppliers, and other creditors. The information shows how long the account has been around and outstanding balances, any past due status and a detailed history of payments.
· Public Records: Information about your company that can be found in city, state, county, and federal records such as business license, property ownership, tax reporting status, and potentially negative information like tax liens, lawsuits, judgments, and previous bankruptcy actions.
Now that you have good credit for you business, you can apply for funding through banks. If you are still working on building your credit, there are other options. You can apply online for a business loan up to $250,000 through Business Funds Fast. They are verified lenders who helped fund over 100,000 businesses since 2015. Most businesses tend to try for personal loans if they get denied from their business loan as well. This is always another option.
We recommend checking your personal credit before establishing your company as business credit is gauged off of it when starting out.