The following article comes directly from www.entrepreneur.com and contains some very valuable information regarding
business credit.
"As an entrepreneur, did you
know you have a unique opportunity to build, maintain and acquire credit both
individually and as a business owner? That's good news if you're trying
to build and grow a company because you won't have to rely solely on your personal
credit to do that.
As a member of the business credit
industry, it's been my experience that fewer than 10 percent of all
entrepreneurs know about or truly understand how business credit is established
and tracked-and how it affects their lives and businesses. So let's first take
a look at how personal credit differs from business credit. Then we'll discuss
some steps you can take to build your business credit.
Personal Vs. Business Credit
At the point an individual with a
social security number accepts their first job or applies for their first
credit card, a credit profile is started with the personal credit reporting
agencies. This profile, otherwise known as a credit report, is added to with
every credit inquiry, credit application submitted, change of address and job
change. The information is typically reported to the credit bureaus by those
who are issuing credit. Eventually, the credit report becomes a statement of an
individual's ability to pay back a debt.
In some cases, the same is true for
businesses. When a business issues another business credit, it's referred to as
trade credit. Trade, or business, credit is the single largest source of
lending in the world.
Information about trade credit
transactions is gathered by the business credit bureaus to create your business
credit report using your business name, address and federal tax identification
number (FIN), also known as an employer identification number (EIN), which you
get from the IRS. The business credit bureaus use this compiled data to
generate a report about your company's business credit transactions. In many
cases, those issuing credit to you will rely on your business credit report to
determine if they want to grant you credit and how much credit they'll give.
The major business credit bureaus
that compile and provide copies of the reports are:
- Dun & Bradstreet
- Experian Business
- Equifax Business
- Business Credit USA
Unfortunately, because the
information provided to the business credit bureaus is sent in voluntarily--no business is required to send it in--the
credit bureaus may never receive all or even any information about your
business credit transactions. In fact, you could go for years racking up
business credit without any of it being reported to the credit bureaus.
Establishing Business Credit
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
mistake most 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 as well as placing all of their personal assets in
jeopardy.
Expert
Credit Consultants, LLC specializes in establishing business credit and funding
using the exclusive Business Credit and Finance Suite as well as credit
restoration and optimization. www.ExpertCreditConsultants.com.
Call today to be approved in over
$50,000 in business credit . It’s guaranteed.
