Common Credit Score Problems Small Business Owners Face
Your credit score plays a pretty important part in your success in life. When you have a bad score, for example, you might not qualify for favorable interest rates or terms when you are looking to take out a loan to buy a home or car. If you own a small business, your credit rating will have an even more direct impact on things. Take a moment to look over these points and learn how your credit rating can stand in the way of your goals as the owner of a small business.
Never Established Credit
Bad credit is one thing, but you might not even have credit to begin with. This happens all the time. If you never opened a credit card or put any utilities in your name, then you might not have any recorded history of credit usage. While it might seem like a good thing, lenders see a lack of credit as a huge red flag. If you’re going to qualify for business loans at any point, you absolutely need to dedicate time to establishing and maintaining credit that showcases your financial responsibility to potential lenders.
Terrible Credit
Another credit score issue that might be holding you back is terrible credit. When your score is in a low position, you are going to have to work really hard to qualify for any kind of financing. What’s more, the loans you will be approved for will usually have very high interest rates or difficult terms to work around. Thankfully, you can improve your score with a bit of work. Make a conscious effort to pay down your existing debt. You can also use your cards less, as this helps to establish that you are living within your means.
Personal Score Confusion
One of the biggest mistakes a business owner will make when first starting out is using his or her own credit cards to fund the establishment. While it might seem like a good idea, it prevents you from giving your business a score of its own. Plus, it conflates your existing score with the rating your business receives and can complicate matters when the time comes to pursue financing. Learn how to separate personal and business finances and you’ll be able to establish your credit in a way that makes sense.
There are a number of ways to create a credit score you can take pride in. Explore your options and see how you can help your business find success.
