Small business owners are becoming acutely aware of the importance of establishing business credit scores that are completely separate from their personal credit scores.
In addition, many have found this to be a viable solution to overcome personal credit challenges that prevent them from obtaining credit.
While strong company credit files and scores can open the doors for various types of financing business owners should continue to work on improving personal credit scores as well.
This can benefit their business in several ways:
First, with good credit scores you have more choices for obtaining funding simply from the fact that certain lenders require a personal credit check as part of their approval process.
Secondly, it strengthens the credit picture of your business overall as many lenders will consider your personal credit scores as a strong indicator to how you will handle your company's financial obligations.
Finally, a potential business partner or investor will look at your personal credit scores as a factor for determining how financially responsible you are.
This alone should bring you to the conclusion that raising credit scores is not only good for your business today but it's also vital to its long term growth as well.
Here are several strategies that you can apply for increasing your scores:
*Become an Authorized User - If your spouse has an existing aged credit card account then add yourself as an authorized user on that account. As an Authorized User you gain all the credit history of that particular account as if you had been on the account since it originally opened.
Keep in mind your credit history does not affect your spouse's account, but any activity, negative or positive from the Main Account Holder (your spouse) will affect you the Authorized User.
*Pay More than the Minimum - Add $10.00 or more on top of your minimum monthly payment and make three payments a month with each payment received ten days apart from one another.
By making a payment higher than your minimum payment and increasing the frequency of payments triggers the positive action or activity on your account. The system will automatically report "More than Minimum Payment Made "to the credit agencies.
The frequency of your payment lets the creditor know you can afford MORE than your current credit line. This triggers two things.
- It triggers the internal system of the creditor to offer you a higher credit limit automatically in about 6 months. Credit Card companies do not like receiving more than one payment a month so since the best customer to a creditor is one that's always in debt they will entice you to use more credit by increasing the limit.
- The credit scoring system (FICO) will calculate more positive action in one month rather than just once a month and give you points for every payment you do make.
While there are many more strategies for improving credit scores pay close attention to some of the more obvious ones. This includes maintaining a 30% debt to credit limit ratio on credit card accounts as well as correcting any errors or obsolete information you uncover on your reports. You can always choose to enroll in a reputable credit repair service as an alternative to doing it yourself.
Even though every business owner has a unique file with all types of factors that make up their scores these simple yet powerful strategies can give you that extra boost you need so your business can reap all the benefits.
About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit solutions membership helping business owners build small business credit. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of "Eight Steps to Ultimate Business Credit" and "How to Build Business Credit with No Personal Guarantee." His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.