One of the key reasons for building business credit is to get away from having all of your company’s business financing tied to you personally.
Did you know business debts reporting on your personal credit reports can have a negative impact on personal debt to credit limit ratios, credit scores, and overall debt to credit utilization?
Without truly separating your personal and company credit you can wind up crippling your own personal credit and personal financing capacity due to your company’s debt loads.
By building strong business credit scores you will be able to secure vendor lines of credit, business credit cards, vehicle leases and many other types of financing using only your business credit.
However, beyond that, there is still more to the equation that many business credit building companies don’t want to talk about.
In today’s current lending and credit markets, an owner’s personal credit rating does play a role in the process.
Did you know banks and conventional business lenders are looking at both personal credit ratings and business credit scores?
If your business credit profiles are strong they may not require a personal guarantee, but they will still factor in your personal credit history and scores into their underwriting for initial approval.
Let me explain, if a business owner (anyone owning 10% or more of the company) or officer of a company has a personal credit rating above 700, then more financing opportunities become available at lower interest rates and a much higher rate of approval.
Truly separating your personal from business credit will better protect your personal assets and personal credit rating. However, there is more you can do now to ensure your personal credit is optimized and your identity is protected from theft and credit fraud.
First, check all three of your personal credit reports to verify their accuracy.
If you have derogatory items on your reports then you should address them as soon as possible and may even consider enrolling with a reputable credit repair service.
If you do plan to apply for business financing at a bank then you will need to have at least a 680 or higher credit score. If you’re lacking in the personal credit department and need to add some positive credit then consider opening a personal line of credit.
By improving both your personal and business credit scores, you will open up much more funding opportunities for your business at better rates, terms and pricing.
Keep in mind there are new bundled business credit card packages that are ideal for business owners with a solid personal credit rating. These credit packages are considered business credit friendly because the credit card issuers only report to the business credit bureaus and not your personal credit.
This allows you to shelter your personal credit for personal necessities such as auto loans, mortgages, student loans, and personal credit cards.
As you can see personal credit still plays a key role in the business credit building process. By optimizing your personal and business credit ratings only benefits you and provides greater leverage overall.
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