Will Bad Personal Credit Keep Me From Starting A Business

Will Bad Personal Credit Keep Me From Starting A Business?

If you are a new or start-up business, or want to own or become one, chances are you will need to obtain credit for your business at some point to either fund the start up or for future growth.

One thing that some are not aware of is that the first thing creditors will check when any new business with no credit history submits a credit application is the owner’s personal credit score. If yours is in the dumps, it will be much more difficult for you to obtain credit until after your business has demonstrated a strong record of sales. I’ve listed some of the most effective methods for boosting your personal credit score near the bottom.

There are several important things you need to do regardless of your company’s sales history or your personal credit score that will get you ready to obtain credit in your business’s name.

1. The first thing you will want to do is incorporate. By forming a legal structure for your business such as an LLC you are demonstrating that your business is a separate entity from you, and that its credit profile should be separate from your personal credit profile.

2. You will need to get your EIN from the federal government. It is the equivalent of a social security number for your business, and is available for free and instantly online.

3. You will want to go into the bank and open up a business checking account using the EIN so that this business money is kept in a separate account from your personal account.

4. Once you have your numbers and accounts opened, you can begin building your business credit profile. You will want to obtain what is known as “vendor credit”. Make sure you have a dedicated phone number for your business that is different from your personal number, and begin using your business information to open vendor credit accounts, accounts with electric and internet providers, leases and utilities, as well as get listed in business directories and likely other activities related to running your business.

5. After that to continue building your business credit profile you will want to obtain a loan. If you’re personal credit is not perfect but you have some cash available, a great way is to self-secure a loan. Open a savings account with your business information at your bank, and then deposit the money you will be securing the loan with. If you don’t have much, try and save up until you have a least $1,000 to deposit. Go to your bank, request a loan, and tell them you will secure it with your savings account. Open the loan in your busiess name, and then pay it off on time or early. If you pay a small loan off early it will cost you almost nothing to begin building your business credit in this way.

Once you have paid off a loan or two and have been generating sales for a few months the amounts and types of loans that your business can qualify for will increase. Taking these very important initial steps can generate a corporate credit profile completely separate from your personal credit, setup the right way from the lender’s perspective.

Having a great personal credit profile can be a huge benefit when you are just starting out trying to build your business credit. If you need to fix your personal credit profile before you can get started with business credit, there are some tried and true methods that you can use. Obtaining a secured credit card, certain catalog cards, getting your positive rental history added to your credit reports, becoming an authorized user on someone’s else positive account, and removing negative entries from your credit reports can take a negative personal credit history and turn it positive in a hurry.

Of course, there are companies out there that can take care of all of this for you and save you a ton of time and headache, but if you have the time then following these simple steps will get you up and running with a corporate credit profile and positive payment history asap.

Source: David Newman – LibertyCreditConsulting.com