What is business Credit

CainFinity By CainFinity, 29th Oct 2017 | Follow this author | RSS Feed | Short URL http://nut.bz/1iflyhdo/
Posted in Wikinut>Business>Accounting & Finance


You are probably aware that credit is a method to assess your credibility as a borrower by using a credit report or a credit score but what do you know about business credit? Whether you are a business owner or are thinking about starting your own company, keep reading to find out how personal credit varies to business credit and why it’s necessary and important.

About business credit

It is necessary. Business credit is much like personal credit in that it speaks for your business ability to borrow money from lenders based on its previous actions. Personal credit is used to assess all- from your capability for another credit card to the interest rate for your home equity loan is connected to your personal information and all participating accounts are kept in your name and with your social security number. Business credit, on the other hand, is associated with the existing business with a separate ID tax number. Once you have set up business credit, changes in your personal credit such as foreclosures or unpaid loans won’t change or alter your business credit and vice versa. Business credit is also much like personal credit, it’s something that needs to be built before it's required. Furthermore, if you are thinking about starting your own business, having money saved up is important to have. There might come a time that your business may need credit to pay for unexpected expenses. So, don’t wait till unexpected circumstances occur for you to apply.

Common business owner mistakes

One of the most common errors business owners make is financing their business costs with their personal credit lines or personal credit cards, which could make them responsible for the existing business dealings. For instance, if the owner of a retail store uses his personal funds to purchase supplies and pay the rent, they could be held responsible when he hasn’t made any payments in four months and creditors come knocking on his door. In addition to being a business owner, you are more than likely to be applying for loans for both, your personal and business credits which they both need a lender to ask a credit agency about your credit history. This means that you are more than likely to get investigated than someone who is not a business owner. Since every investigation marks your credit score it's vital that you distribute them into two different files to minimize the effect. Starting business credit early on will benefit you in that you could obtain better interest rates on loans when it’s time to apply since you had time to build a substantial business credit history.

What business owner should know about credit

Once a business owner has built a credit line, you should only use it for business needs and ensure payments are made monthly. Your credit score can be affected by your tradelines, repayment patterns, the size and how many years you have as a business owner. You can also improve your credit by using your business tax ID for credit cards, services, and any type of credit line and of course, keep up with your payments. So, if you are a business owner or are thinking of starting your own business and need to check your credit, PAYDEX, created by Dun & Bradstreet will evaluate your payment history and give you a score.

Tags

Credit Score, Lenders, Personal Credit, Social Security Number

Meet the author

author avatar CainFinity
Maira is an eager, enthusiastic, and highly motivated writer. Loves reading, writing, typing,blogging, and translating documents in English to Spanish. Is ready for any project and/or challenge

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