Bad personal credit has stopped many an individual and aspiring entrepreneur in their tracks. When it comes to your personal life, bad credit affects your ability to get a loan, rates insurance companies charge for auto coverage and even your job promotions, among many other things. For lenders, your credit score (ranging from 300 to 850) reveals your creditworthiness, or lack thereof. The score itself is determined by five factors: your payment history, current level of indebtedness, types of credit used, length of credit history and new credit accounts.
The effects of your score on your personal life can be devastating. Even worse, the effects can extend beyond your personal life and bring your business plans to a screeching halt. Many mistakenly assume this means end of their business venture. Believe it or not, it is possible to have bad personal credit and strong business credit. In fact, experts encourage that building your business credit while also trying to rebuild your personal credit is a wise decision.
Building Strong Business Credit
Time. Time and patience. It takes time to build business credit when your personal credit is less than stellar. Many business owners find companies willing to allow them to purchase supplies “on terms”. This allows the business to pay for the items down the road. For example, if the business secures net-30 terms, the payment will be due in thirty days after the invoice date.
These payment arrangements are then reported to commercial credit agencies, which means they then appear on business credit reports. The idea is to make sure all your payments are made on time; these invoices paid then provide credit references that help to build business credit. Keep in mind that not all of your current vendors will be willing to work with you. It might be necessary to find new companies that will extend terms to new customers and then report those payments.
As you rebuild your credit, keep these tips in mind:
- You need to have four or five accounts (at least) that appear on business credit reports.
- Always pay on time, but paying early is even better.
- You don’t need to accumulate debt or carry balances to build credit.
Bad Credit Merchant Loan
Are you aware that there are merchant loans for bad credit? A bad credit merchant loan, can be secured through an alternative lender like First American Merchant. As a high-risk specialist, FAM has years of experience in providing solutions that are tailored to meet the needs of each business type and industry it works with; this includes those with bad credit or insufficient credit history. Even better, their flexible business funding programs can actually help you rebuild your credit score.