Frontier Shares it's Secrets on How to Establish Strong Business Credit
Businesses can be made or broken by just their business credit score. If personal credit scores run from between 300 to 850 with 680 score identified to be high or excellent, businesses credit score uses a bit of a different scale, from 0 to 100 and business having a 75 or higher business credit score is considered to be high or excellent.
And what are the business credit bureaus basis of your score? A lot of things, which may or may not include the following: how many companies have asked for your credit profile, how long since you have first established your business’ credit profile, the available credit you have in banks and how much is still available and of course, your ability to pay debts and bills (if paid on time and on the right amount). You can actually get more detailed information of these factors by going to FICO’s official website.
A lot of entrepreneurs have made this mistake time and again: applying for leases, loans & business credit by making use of personal information. And what is wrong with doing that, you ask? Well, doing this may lower one’s personal credit score.
You might wonder why. Well, simply put, if you use your personal credit as your business credit, the number of companies who will request for your personal credit profile will significantly increase in number because the lenders, banks, creditors and suppliers you applied to for business credit will be looking into this information as well as those lenders you applied for personal purposes. If your loans for your business get approved, this will also increase the number of your credit obligations because both personal and business credit obligations will be reflected on just one credit profile or report – your personal one. These factors are only one of the few that can impact your personal credit score negatively. Continuously using your personal credit score for business purposes will also hinder you from successfully expanding your business if you have plans of doing so.
So how do you create your business credit profile? Where do you start? Well, the first step is to look for companies who are willing to establish business credit for your business without needing to use any information on your personal credit. Once you find such company, you yourself should be the one to report your business credit transactions to the different business credit bureaus. When you give this information to such agencies, they in turn will assist you in building your business credit profile.
To establish your business credit profile, you need to do the following: create an LLC or corporation and get an EIN or FIN through the IRS. This can actually be done online. Next is to proceed to registering your business to the business credit bureaus. You also need to complete all requirements in the business credit market. After that, you would need to create a business plan as well as prepare all financial statements. Afterwards, you look for companies that will give you credit without need for a personal credit check. Once you get approved, all you need to do is make sure you come through with your payments and keep your business profile active by updating the credit bureaus with your transactions.
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