If you are running a business out of your home, then there are many details that you need to keep in mind. You should probably be reading up on as much information that you can get ahold of on having a business at home. One of the most essential pieces of running a bussiness from home that you absolutely need to know from the start is to get a business credit card to use for everything related to your business.
Unfortunately, as a business consultant, I have talked with far too many business owners that come to me after failing at running a home based business. Why? Poor management of finances. Far too many people use their personal savings, retirement, home equity, and credit and that is a very dangerous thing to do.
I thought that the importance of seperating your business credit and personal credit was obvious, but maybe it is not. Registering your company with the business credit bureaus and getting business credit cards that don’t show up on your personal credit ultimately allows the home based business owner or Entrepreneur to have the freedom to truly keep their personal finances and their business finances separate. This is essential throughout the year and obviously when it comes to tax season as well.
There is no reason why the finances of a home should be mixed up with the finances of a business. Keeping the credit profiles, credit cards, bank accounts completely seperate will set you up for more funding options in the long run.
Here’s the bottom line: Entrepreneurs and home based business owners need to separate their business and more so because they usual operate from virtual office spaces or from home. This will be impossible without registering your company with the business credit bureaus and establishing business credit cards that do not report to the personal credit bureas. So apply If you want a widly succcessful enterprise you must do what widly succcessful business tycoons do. It will make a huge difference to the organization and success of your company and ability to raise capital.
Quick credit repair might seem impossible if you’ve been having credit problems. It’s easy to think that once your credit score is damaged you might never be able to fix it. Fortunately, it’s possible to take just a few steps and achieve quick credit repair that can make a huge difference in your score.
Step 1 make sure you make the right payments on time. If you’re having financial problems, just this first step caIf you’re having problems with your credit, you’ve probably gotten behind on at least one debt. Late payments or missed payments can dramatically damage your score.n seem difficult. But if you figure your income and expenses and there’s just not enough there to make the minimum payments, then you need to contact the companies and let them know you’re having a hard time.
If this doesn’t work and you still can’t pay, you may want to look into a quick credit repair program that negotiates for you to pay a percentage of what you owe in smaller payments. It’s important to do something so that you don’t keep getting farther and farther behind.
Step 2 Manage the balances on Your Credit Card Balances. If your balances on your cards are more than 40-50% of their limits. You can pay more on each card if you want. But you’ll get more of a feeling of satisfaction if you choose one card to work on first. Make the minimum payments on the other cards, and pay as much as you can on that one card. Using this method, you’ll see the balance of that card drop more quickly. Once that card is paid off, chose another card and start applying what you were paying on the first card to it in addition to its minimum payment.
Step 3. Contact Experian, Equifax, Innovis and TransUnion and request your free annual credit report. Look them over and contact them about any errors. These are 3 easy quick credit repair tips than can really improve your score right away.
Amazingly enough, someone’s life can be drastically affected by three numbers. Here’s a look at the consequences they can bring. You should review your personal credit reports at least once per year. If all 3 scores form all 3 credit bureaus (equifax, transunion, experian) are above 720, congratulations! You have excellent credit; stop worrying.
If you’re scores are not above 700, no problem—let’s get to work. Take solace in the fact that the national average score is around 676 according to the Gallup Organization. If you’re scores are below 400, 500, or 600, there’s definitely room for improvement and only one way to go—up!
This Book Credit Restoration for Entrepreneurs will help you get started.
Personal credit scores range from 350 to 850. All three of the credit bureaus—Equifax, Experian, and Transunion—offer FICO credit scores using a complex mathematical formula developed by Fair, Isaac and Company, but they each give the scores a different name: At Equifax, the FICO is known as the Beacon credit score; at TransUnion, it’s called Empirica; and at Experian, it’s called the Experian/Fair, Isaac Risk Model.
Business credit scores range for 0 to 100. The major business credit bureaus are Dun and Bradstreet and Experian Insights. Unlike their counterparts the business scoring system is not complexed. It is quite simply based on payment history. Each credit bureau does however, give the scores a different name. At Dun and Bradstreet the score is called a PayDex and at Experian it is called an Intelliscore. Here is the bottom line in this crash course: Good business credit scores PLUS good business credit scores gets you access to lots of business funding!
Costly Mistake #10: Rushing Your Business Credit Profile!
Two Words: RED FLAG
Dun and Bradstreet Partners with the federal government to provide information on small businesses in America. One of the biggest components is fraud. There are certain activities within a business credit profile that will cause a company to get on D&B’s Radar. One activity is quickly beefing up a credit profile in a small time frame.
Remember organically a company builds good business credit in about 3 to 4 years, so, if a start-up or young company initiates the companies profile and has 5 or 6 new vendors reporting every week, that activity will seem suspicious. Once a company has been red flagged by D&B it is very difficult to obtain business credit.
Costly Mistake #1: Starting Your business as a Sole Proprietorship Will Prevent Your Business from Accessing Maximum Capital!
Over 70% of all small business owners still operate as sole proprietorships. The problem with sole proprietors is they self-finance their business with their personal credit cards. Unfortunately, the accounting world is telling these people, “You don’t make enough profit to incorporate, stay a sole proprietorship and keep it simple.”
But this really shoots them in the foot when it comes to financing later. I’d rather see people incorporate as soon as they get started. Stop using their personal credit cards, get the business credit cards (not psuedo business credit cards), and begin using them. Protect your revolving debt and keep it as low as possible.
If your personal revovling debt is 80% -90%, you are automatically going to get rejected by the bank when you apply fo a business credit card, or you may get a very, very low limit. It is extremely important that you incorporate as soon as you start your business and stop using your personal credit cards. Keep your revolving debt low, and work on your personal credit score.
As entrepreneurs, we each have a big vision for the kind of lifestyle, the independence and the happiness we intend to create with our own small business. I speak from personal experience when I say that it’s necessary to build consistent financial “systems” if we truly want to achieve all of our goals and dreams. We help you develop the financial clarity and business image you need to grow a successful and prosperous business.
I hope the information you find here will make you a Credit Savvy CEO.