What Can You Do To Improve Your Personal Credit Rating?
Anyone going through this process needs to have an updated copy of their credit report with their credit score, but you really want to get your credit scores, not just your credit report. Credit reports show your file, but do not compile your score for you.
I recommend http://www.GetMyFREECreditReports.com. For between $9.95 and $14.95 you get scores from the main credit bureaus: Trans Union, Equifax and Experian. These scores’ average determines your FICO score–the ultimate determinant of your personal creditworthiness.
To develop your business credit rating, begin with your personal credit and learn where you’re starting from.
Things may need to get worse before they can get better during the business credit application process. Even with strategies to control it, expect your credit score to drop up to 20 points from the inquiries you’ll be getting as you apply for credit.
Many people tell me they don’t want their good credit score to drop.
I’d rather lose 20 points on my score and gain $400,000 to grow my business than have a higher credit score and no cash.
Of course, down the line you can make up those 20 points. Research shows, that your chances of getting the “inquiries” removed from your file before their time is due is 50% no matter what you do or pay. Credit bureaus will send a request for confirmation of the inquiry to the creditor that requested it. The creditor has 30 days to investigate the inquiry and report back to the bureau.
There are ways to challenge the system that you can learn.
For example, one friend has $2 million in business credit, accumulated in a little over ten years. He discovered he had accumulated over a dozen inquiries. Every four months he set time aside to go after them himself and was able to take six or seven of them off. Then he could get another $200,000 in credit. Following this system got him to the $2 million dollar mark, showing that sometimes all you really need is patience.
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Why do 50 % of small businesses fail in their first year and 95% by their fifth year?
Why do 50 % of small businesses fail in their first year and 95% by their fifth year?
The answer is simple: they run out of MONEY!
Whether you’re starting out with great credit or not, you should establish a corporation. Then you can get secured credit cards to help build your corporation’s credit score.
These cards are issued based on an amount of cash you put into a secured bank account. Once you receive the secured credit card, use that cash to pay bills that you would normally pay monthly, such as rent or the phone bill. You can use the card to establish buying activity as well as keeping a track record of payments in order to get or increase your scores.
The credit bureaus will then report these types of cards and help you build credit under the business’ name.
Remember, you want your corporation to look good, so when you present yourself to somebody in a future business deal whether it is a lender or another investor, you want to show what credit you already have, and what your scores are for your corporation — not yourself personally. Many will be impressed by that, because not many people can do this.
I built a corporation in spite of this with a little effort and some patience. Then I added two people as credit partners and in one week I received $200,000 in credit. I did not have great credit, but I brought people on who did, and I was able to leverage their resources to get what I needed.
In business, understanding and utilizing the power of leverage of other people’s resources can get you far ahead of the game. If you have bad credit or you’re credit challenged for whatever reason, you can get a credit partner and build $200,000 just like I did.
So long story short – the answer is yes, you have to have good credit if you are building credit under your name. If you are building credit under your businesses’ name and following this process, your credit won’t matter at all!
The Real Difference Between Business And Personal Credit?
What’s the real difference between business and personal credit?
The real difference is that business credit will not be showing up on your personal credit report.
If you have business credit and it is showing up on your personal credit report then it really is not business credit after all. Many people think they’re getting a business credit card. Then it shows up on their personal credit report. It’s really just a personal card with a business name on it.
But it’s possible to get real business credit by using your tax ID number. There are a series of steps that need doing in order to reach this point.
There are only two credit applications that won’t reflect on your personal credit that don’t ask for a Tax I.D. number: Capital and GM. If the credit card applications do not ask for the tax ID number, you’re not filling out a business credit application.
You’re better off getting such “invisible credit,” because it won’t show up on your personal credit although you personally guarantee it to get business credit. In the future it will be unsecured, and guaranteed in other ways.
For example, if you get a line of credit on your home, the house is guaranteeing the loan, not you. By developing your business credit file you’re doing the same thing. Your business will guarantee the loan, not you!
Do you need to have good personal credit to get business credit?
This is one of the most frequently asked questions that we get and the answer is, yes!
But don’t be too quick to rule this out of your repertoire of opportunities to grow your business. You can learn how to get business credit whether you have good credit or not.
Getting business credit is like the old saying about making your first million. Making your first million is always the hardest. The second one is much easier. Once you do it once, you just repeat the process over and over again to make more money. The same is true for achieving success with business credit.
What The SBA Knows About Your Business…
These startling facts from the Small Business Administration website (SBA.gov) bear repeating:
- 50 % of small businesses will fail in their first year.
- 95% of small businesses will fail by their fifth year.
“Do I need to have good personal credit to get business credit?” is definitely one of the most frequently asked questions that we get; and the answer is, yes!
But don’t despair. If you are someone who said, “Crap, then this is not for me!” don’t be so quick to rule this out of your repertoire of opportunities to grow your business. This course is designed to teach you how to get business credit whether you have good credit or not.
Getting business credit is like the old saying about making your first million. Making your first million is always the hardest. The second one is much easier. Once you do it once, you just repeat the process over and over again to make more money. The same is true for achieving success with business credit.
Let me elaborate on this a bit more. When I started using this process I had a credit score in the five hundreds. In spite of this I was able to build a corporation, but it did take me eight months to do this.
Now, I have had the privilege of being able to do it for hundreds of people all over the world in all different types of situations.
If you apply the information that is taught to you throughout this course you will be able to be one of these people who are constantly getting an endless supply of money in order to grow your business.
Obviously, the better your credit score from the start the faster this process will be able to be done. I have found that if you have a least a 680 credit score, your chances of accelerating this process increase. However, if this is not the case not only will I teach you ways to increase your personal credit but also how to take on a credit partner that will help you get lines of credit.
Why Do Businesses Fail?
Here are some startling facts from the Small Business Administration website (SBA.gov):
50 % of small businesses will fail in their first year.
95% of small businesses will fail by their fifth year.
The main reason for these failures is money–and the largest single factor is poor or deteriorating credit
- How can I influence my business credit profile?
Knowing what information is most important gives you the inside edge and allows you to pay more attention to the important factors of business credit.
You can develop a strong business credit profile by:
Paying on time– Other companies’ payment experience is the most important information in your business credit profile. Always pay within the terms set forth by your suppliers. This is the most direct way to drive a positive credit rating.
Tip 1: Ensure all relevant trade experiences are represented, or you may not get the credit you deserve for paying bills on time, and for conducting more business. Check your profile often and make sure every vendor payment relationship has been captured.
Tip 2: Keep your personal finances in good order. If you’re the owner of an emerging business without a robust credit profile of its own and your consumer credit profile also may be subject to review. The condition of your personal finances can impact your company’s creditworthiness–although business and personal ratings are kept separate and distinct.
Tip 3: Keep your business credit profile in good order. If you see accounts that aren’t yours, mistakes your bank made, or false negative activity you’ve already addressed, address these inaccuracies. D & B subscribers can sign up with the online tool D & B e-Update, or call their Customer Service Center.
Tip 4: Keep your debt financing down. The capital structure of your business—the extent to which you use equity or debt to finance your operations—is key. If there’s a lot of debt on your balance sheet, in absolute terms or relative to your competitors, businesses are less likely to extend credit.
Tip 5: Contribute to your own profile. Some credit managers prefer detailed reports with lots of supporting information, so they can assess risk based on more data. Communicate as much information about your business as possible for a more robust report.
Compare the key financial indicators in your own report with those of similar companies so you can identify areas for improvement and build your profile for a satisfactory credit investigation.
How is your business credit used by other businesses?
Companies rely on your business creditworthiness to make critical decisions, including whether:
- to sell to you
- to lend you money
- you are viable as a partner
- to lease the equipment you need to grow your business
- to increase your line of credit
- to help you carry more inventory at competitive prices
- to give you favorable financing rates and terms
- you stack up favorably against other companies competing in your market space
What determines your business’s credit worthiness? A business’ creditworthiness is ultimately determined by what are known as the “4-Cs of Credit”– character, capacity, capital and conditions.
1. Character includes factors such as: size, location, and number of years in business, business structure, number of employees, history of principals, and appetite for sharing information about itself, media coverage, liens, judgments or pending law suits, stock performance, and comments from references.
2. Capacity assesses the ability of the business to pay its bills, i.e., its cash flow. It also includes the structure of the company’s debt—whether secured or unsecured—and the existence of any unused lines of credit. Any defaults must also be identified.
3. Capital assesses whether a company has the financial resources (obtained from financial records) to repay their creditors. In general, this portion of the credit report is the one most closely reviewed by the credit analyst. Heavy weighting is given to such balance sheet items as working capital, net worth and cash flow.
4. Conditions consider the external factors surrounding the business under consideration - influences such as market fluctuations, industry growth rate, political/ legislative factors, and currency rates.
A credit manager or loan officer will answer these questions by locating and reviewing:
- requests for credit information
- customer supplied information
- bank information
- trade information
These factors are also taken into consideration by other service providers, such as insurance companies to set premiums. More than ever, companies are using automated-decisioning, which means they input scores and ratings that summarize the 4-Cs into a financial model to determine the risk of doing business with you.
What Is Business Credit?
Small businesses are the major driving forces in our economy. So why then do 50 % of small businesses fail in their first year, and 95% by their fifth year? The answer is simple: they run out of MONEY!
Dun and Bradstreet, where lenders turn when deciding how much credit they are willing to give you for your business, compiled these most frequently asked questions about the important subject of business credit.
1. What is business credit?
Your business credit record is the primary way that companies evaluate whether to do business with you-and on what terms. Companies rely on your business creditworthiness to make critical decisions, including whether:
- to sell to you
- to lend you money
- you are viable as a partner
- to lease the equipment you need to grow your business
- to increase your line of credit
- to help you carry more inventory at competitive prices
- to give you favorable financing rates and terms
- you stack up favorably against other companies competing in your market space
This type of information is listed in your business credit profile, along with scores and ratings that are derived from your businesses past behavior to predict its future behavior. For example, your ability and willingness to pay your bills on time in the past is factored into your ability and likelihood of paying your bills in the future.
2. Why is business credit important to my business?
Good credit is the lifeline of your business. It enables you to obtain funding for things like expansion, capital expenditures, research and development and staffing. It is the principal contributing factor to your business’s future growth, not to mention the cash necessary for survival.
Good business credit also allows you to keep the cash you have to cover your cost of doing business; such liquidity lets you respond quickly to time-sensitive requirements, without halting or compromising operations.
It’s not just about getting access to financing; business credit has increasingly become the primary vehicle for setting terms on business loans, determining insurance premiums, even setting lease payments. Good business credit can earn you lower rates, strengthening your cash flow.
The Beauty of Business Credit And The Beast with Personal Credit
The Beauty of Business Credit And The Beast with Personal Credit
If you’re an entrepreneur and you plan to be in business for awhile then you must start now to build your credit. If you wait, you simply lose the time that you could have been using to build your business credit.
There are just too many advantages of using business credit. I will pull back the curtain on both business credit and using your personal credit to fund your business.
Here’s the beauty of business credit…
1. It’s based on the TAX ID number you get from the IRS - You can have as many corporations as you’d like
2. You aren’t penalized for inquiries
3. The more money you get access to the better you look to vendors and other lenders
Here’s the beast with personal credit…
1. It’s based on your social security number (and unless you know how to get another one) you can only build credit on it
2. You are penalized for inquiries
3. The more money you get, the riskier you look to lenders and vendors
With Business Credit Perception Is Not Reality
With Business Credit Perception Is Not Reality
There are many different theories about getting business credit. Now, it’s not hard to get some form of credit for your corporation or business, but if you aren’t doing certain things right, you probably aren’t getting the most amount of credit you could be entitled to.
I’ve broken all the following rules, but I was still able to get $93,000 in business credit in just 3 months. Could I have received a lot more? Sure, but sometimes good is good enough.
However, if you want to get the maximum amount of credit for your business then make sure you follow these rules.
1. Have a land line versus a cell phone - This could be as simple as getting a vonage number. Just make sure that on the application you aren’t listing the business phone number the same as your cell phone number.
2. Put on your application a commercial address - If anything don’t list a P.O. Box. A UPS store address is better, a home address even better, but the best is having a commercial address.
3. List your business in 411 - It’s just another setup towards making you look more legitimate.
Imagine if you were granting money to a company. Wouldn’t you like to see that this is a legitimate looking business, rather than some mom and pop shop running out of the basement.
You can have that mom and pop shop, but give the bank the perception that you are a Fortune 1000 company. The best part is that this is all completely legal and legitimate!
My ‘Love-Hate’ Relationship with Business Credit Bureaus
My ‘Love-Hate’ Relationship with Business Credit Bureaus
Do you ever sit back and question why the business credit
bureaus are in business? If you ever stopped to think about
it, you would begin to understand that they are private companies
in it to make a buck…a serious buck.
Before, I pull back the curtain on the business credit bureaus,
it’s important to know that there are two main credit bureaus,
Dun & Bradstreet (D&B) and Corporate Experian. Sure, there are
countless others, but these are the main ones you should know
about because most lenders and companies go to these guys.
Both D&B and Experian rate your business by giving you a score.
D&B has a Paydex score and Experian has an Intelliscore. These
scores are important to you because that determines.
They bureaus are in business to sell information - your
information. Not only do they charge companies to pull your
business credit report and score, they sell your information to
lenders.
Now this could be a good or bad thing, depending on you score.
If your company has a bad score, you are less likely to get
financing. However, if you have a great score, you will be
bombarded with offers.
The reality is that lenders will buy the names and addresses
of most of the corporations on file with D&B and Experian,
and send offers in the mail. However, if you are a company
in good standing. you will be bombarded with offers. In
addition, you’ll get better terms and conditions.
Who likes the idea of banks chasing you to have access to their
money? Keep a good score and you’ll be flying high!
