Credit When Credit is Due
Credit When Credit is Due Why your credit score is important?
First things first. It is ideal to have a business credit score, separate from your personal credit score. If you personally have financial hardships, it will not be reflected on your business credit report. For example, if you have a foreclosure on your personal credit report, your business credit report will be pristine. Additionally, if your business goes under, it will not affect your personal credit report and impact your ability to purchase a home for your family. If you can, keep them separate. However, I must mention that in the start up phase of your business, creditors will look at your personal credit report until your business can build its own credit history.
Your business credit report can affect your ability to get loans, receive trade credit from vendors, and can even determine if potential business partners will want to do business with you. Establishing, managing, and monitoring your business credit, can prevent that uncomfortable conversation with your banker or potential partner. You know the one I'm talking about. "We would love to do business with you, but unfortunately..." And nothing is worse than developing a new strategic plan for the new direction for the company and then not being able to execute it because you can't get funding or because people are uncomfortable working with you. How to access your credit information? The two sites I would recommend visiting are www.dnb.com and www.experian.com. Both will show you if they have available information on your company. They also offer a lot of advice and services on how to establish and build your business credit., including:
- Assigning your company a Dun & Bradstreet number (Dun & Bradstreet is the industry leader for providing business credit information) - Develop a credit history based on payment history - Develop a PAYDEX score (like a FICO score for your business). It ranges from 1 to 100, with 100 being a perfect score. - Resources to help you increase your score - Establish e-mail alerts to help monitor changes in your credit score How to understand your credit report? There are several categories that will appear on your business credit report including, but not limited to:
- Percentage of payments that have been made within the payment terms - Number of items that have been sent to collection - Financial statements - Suits, liens, and judgments - Your overall D&B rating
Every business should begin working to establish its credit history, although it may not help you in the present moment, you will definitely need it in the future and it will be too late to try to establish a credit history if you need a loan in 90 days. Additionally, your credit should be monitored, just as personal finance experts recommend pulling your own credit file once a year to check for errors, you should do the same for your business credit. Think of it like an annual check-up for your credit to ensure your company is in good financial health.
About the Author:
Aisha Jones-Scheffel is "The Doctor CFO". Get her FREE SPECIAL REPORT, "7 Never Before Told Ways to Make Your Practice Stop Bleeding Money (That Has Nothing to do with Insurance or Billing)" and her FREE money management how-to tips at www.DoctorCFO.com .
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