Building Good Business Credit After Bad Credit
by Gerri Detweiler
Can you establish good business credit if you have bad personal credit? The
answer is yes...but with a few caveats.
Business credit reports and personal credit reports are generally completely
separate databases for legal reasons. However, there are some exceptions in
terms of how independent that information may be:
-- If you are operating as a sole proprietor or Limited Liability Company,
it is difficult to separate your personal and business credit. A corporation
is a much better structure to build a completely independent business credit
report.
-- Experian sells a credit score that is a combination of the business owner's
personal credit history and the businesses' credit history.
In the early years of a business, the owner will almost certainly be required
to personally guarantee loans. However, as you establish a strong business
credit rating for your enterprise, you'll have more leverage to negotiate for
a loan without your personal guarantee.
A warning: some people try to use business credit file to repeat bad credit
habits.
"I've seen people who ruined their own credit go out and start a business,
enlist the help of people with good personal credit to be executives in the
company, and get major credit cards. They didn't have a real product or service,
and the objective was to just get credit. They would inevitably default on
the corporate credit lines," says Erik Salmon, Director of Business Credit
Services for Innovative Business Services (IBS) and an experienced business
credit coach. If that's your intention in establishing a business credit rating,
you're better off taking some personal finance courses to learn how to manage
your money.
If, however, you legitimately want to make a go of a business, have a solid
plan, and are willing to do what has to be done to get it off the ground, then
you should let a bad personal credit rating stop you. Building or rebuilding
good credit - whether it's personal credit or business credit - is a process.
Be patient as you work on both your personal and business credit. The results
will be worth it. For more information, visit www.businesscreditsuccess.com.
About the Author
Gerri Detweiler is considered one of the country's top credit
experts. She has been interviewed for thousands of radio, television and print
newstories including USA Today, The Wall Street Journal, The New York Times,
Dateline NBC and many others. She has testified before Congress several times
and worked on reform of the national credit reporting laws.
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