Small Business Owners: How to build personal credit

I started my small business almost 10 years ago and I quickly learned how important it was to have excellent personal credit. When you are a small business owner, pretty much everything you need to buy on credit or lease, including office space, computers, and even office supplies, requires a personal guarantee. That means the vendor is looking at your personal credit score to determine if you are a good risk!

1) Keep an eye on your credit report – I had never paid that much attention to my credit before starting my business. When I ran the report I immediately saw a couple of things that I could clean-up simply by disputing the validity of the reporting. Some creditors had doubled up their accounts or left old records on the report after selling the account to a new creditor. These were really easy to clear and made a big difference.

2) Don’t apply for credit lightly – I used to apply for department store credit cards just to get the 10% off promotion and then never use the card again. That’s okay up to a certain point, but if you are really trying to improve your credit rating you have to be more discerning about when you apply for credit. Every inquiry has the potential to lower your score and it can take months for the inquiries to drop off and your score to go back up. Also, those department store credit cards often have really low starting credit available and one major purchase can tip your % of credit used to a higher ratio which can really impact your score.

3) Know your score – By being aware of my score and checking it every month or so, I became aware of what impacted it negatively and positively. It became a goal for me to at least one action each month to increase the score: pay down debt, increase a credit limit, not make any inquiries, etc. I use Credit Karma to monitor my score and full credit report for free.

Now I’m in control of my credit and I know I can go into the bank and qualify for a business line of credit or a large equipment purchase without much effort at all – my small business relies on it!

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