Let's start by talking about your business credit score.
Business credit scores range on a scale from 0 to 100 with 75 or
more considered an excellent rating. Personal credit scores, on the
other hand, range from 300 to 850 with a score of 680 or high
considered excellent.
It's important to note that there are many factors that
affect a credit score; it's based on more than just whether you
pay your bills on time. Your score can be affected by the amount of
available credit you have on bank lines of credit and credit cards,
the length of time you've had a credit profile, the number of
inquiries made on your credit profile and more. You can find out
more about what factors affect your credit rating by visiting
www.myfico.com.
The mistake many business owners make is using their personal
information to apply for business credit, leases and loans. By
doing so, they risk having a lower personal credit score.
Why is that? The average consumer credit report gets just one
inquiry per year and has 11 credit obligations, typically broken
down as 7 credit cards and 4 installment loans. Business owners are
not your average consumer, however, because they carry both
personal and business credit. This typically doubles the number of
inquiries made to their personal credit profile and the number of
credit obligations they carry at any given time, all of which
negatively impact their personal credit score. And because business
inquiries and personal inquiries aren't separated on their
personal credit report, the scores, again, is negatively affected.
At the same time, by using their personal credit history to get
business credit, they're not able to build their business
score, which could help them attain critical business credit in the
future.
The key to establishing a business credit profile and score is
to find companies that will establish credit for your business
without using your personal credit information and then report the
payment experiences to the business credit bureaus. By reporting
the information to the proper agencies, they'll help you
establish your business credit profile.
The following are the basic steps you need to take to establish
your business credit profile and score:
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