Have you ever wondered how to go about building your business credit score?
Did you even know that you can have a business credit score? For some people that may come as a surprise; not everyone is aware that their business credit score is separate from their personal credit score. They are separate, though, and it is an important distinction that not all business owners realize even exists.
If you’re a new business owner, you may not have given any real thought to the difference between personal and business credit, but it’s definitely something you should start thinking about if you want to build a good financial future for your company.
Many small business owners run their companies entirely using their personal credit, but that can actually be a risky proposition if your business ever ends up in trouble. If your business does just fine though, there are still some good reasons to start building your business credit score.
Although you’ll probably be using your personal credit when you first start your new business, eventually business credit becomes a necessity when it comes to expanding. If your company gets big enough, you might end up needing more financing than your personal credit can support, which is where a good business credit score will come in handy.
So how do you go about building your business credit score anyway? Typically, you’ll begin by opening a business bank account. To do that, a lot of banks will require that you show proof of a federal Employer Identification Number (EIN) and documentation showing that you’ve incorporated or formed an LLC. You’ll need to make sure that you keep your business and personal bank accounts separate, and don’t pay for personal expenses out of your business account until you’ve transferred the money into your personal account. Obviously, don’t bounce checks from your business account, just like you wouldn’t bounce checks from your personal account.
After you open a business bank account and have begun using it responsibly, you’ll need to get credit in order to build a credit score – just like you would with your personal credit.
Once you get a business credit card, you should try to use it often, pay it on time and in full, and avoid maxing out the card. In other words, do the same sensible things that you’d regularly do to establish good personal credit.
Even once you have a business credit card, you should also do your best to maintain a good score on your personal credit, because personal and business credit scores can be linked. The Fair Credit Reporting Act gives permission for lenders to review an applicant’s personal credit in making determinations for business lending decisions. This only comes up for sole proprietorships, but a lot of small businesses fall into that category because they don’t register an LLC.
Once you’ve gotten a business credit card and have begun establishing business credit, you’ll need to make sure that you monitor your business credit score just as you would monitor your personal credit score. A lot of people know that they should regularly monitor their personal credit, but how can you monitor your business credit score?
Creditera makes it easy with a thorough credit monitoring service that keeps tabs on both your business and personal scores so it’s all under one roof.
To learn more information, visit Creditera today and start with a free credit check before you consider signing up for the monitoring service. With Creditera, you’ll be alerted to changes in your personal and business credit scores with daily alerts. Not all credit reporting services include both types of credit scores for one rate! Along with the daily alerts, you’ll also see a comprehensive view of both your credit reports, and you’ll get important tips and advice on how to improve your credit. Rapid Financial Solutions endorses this credit reporting system, so you know it’s a good service for your business. Sign up today!