Your Personal Credit and Your Business Credit History

When establishing a separate credit history for your business, does your personal credit matter?  Does it make a difference whether or not you have good personal credit?  As a business owner, why should you be concerned about your personal credit score?Your Personal Credit and Your BusinessAs a new entrepreneur, you may need to apply for a loan in order to finance your business.  Without business credit, lenders would be looking at your personal credit history instead to determine whether to approve or decline your application.  Thus, having an excellent personal credit or a high FICO score would surely win you an easy approval from your preferred lender.  Consequently, if you have a low FICO score or a questionable credit, you may find it more difficult to get approved for a loan.On the other hand, you may also be able to obtain the loan you need by applying for a bad credit business loan.  Lenders who offer poor credit business loans always approve clients regardless of the status of their credit.  However, these loans are expectedly more expensive than loans that require good credit.Clearly, the status of your personal credit score makes a difference in getting the financing you need for your business.  But what happens after your loan has been approved?  What’s the next step in building your business credit?  Why should you establish a separate credit history for your business?Establishing Your Business CreditAs soon as your loan has been granted, you should take the necessary steps to establish a separate credit for your business.  Make sure that you’ve obtained all the necessary permit, licences, tax id numbers, and registration numbers that are required for businesses.  Afterwards, register your business with a business credit reporting agency like Dun & Bradstreet or Experian Business.Remember to submit your monthly loan payments on time to build good credit.  At the start, any delays or misses on your payments will also reflect on your personal credit report.  Why is this?  Since your personal credit history was used on opening up the loan, your credit report acts like a co-signer for your business.  Therefore, it is crucial to keep up with your payments not only to build a good business credit but to protect your personal credit as well.After some time of consistent payments, you should have already established your corporate credit.  You may need to wait a year or more before you can completely separate your business credit report from your personal credit report.  New businesses are just like a teenager who’s just starting to build a credit history for himself.  At first, a student may need a co-signer to get a loan but once approved, a student can slowly build his own credit history and after a while,  he can easily apply for new credit without relying on other people’s credit.  Clearly, if you plan to venture in business, preparing your personal credit is a must.  Although a good personal credit history isn’t necessary required to start a business, it is definitely an advantage.