Building good credit takes time and discipline. By following these tips and being responsible with your credit, you can establish and maintain good credit for both your personal and business finances. The higher your credit, the more access and better rates your business has to programs such as Term Loans, Lines Of Credit and Working Capital.
Building Personal Credit:
- Pay your bills on time: This is one of the most important factors in building a good credit score. Late payments and collections have a negative impact on your credit score and stay on your credit report for up to seven years.
- Keep credit utilization low: Try to keep your credit card balances low and avoid maxing out your credit cards. Experts suggest keeping the utilization rate under 30%.
- Monitor your business credit: Stay on top of your business credit report to ensure there are no errors or fraudulent activity.
- Diversify your credit: Having different types of credit payments, such as a mix of credit cards, auto loans, and mortgages can positively impact your credit score.
- Get a secured credit card: If you're new to credit or have poor credit, a secured credit card can help establish credit and improve your credit score.
- Consider a credit builder loan: A credit builder loan is designed to help individuals establish or improve their credit score.
- Be mindful of credit inquiries: Too many credit inquiries in a short period of time can negatively impact your credit score. Hard credit pulls decreases credit in the short run.
Building Business Credit:
- Incorporate your business: Forming a legal entity such as a corporation or LLC can separate your personal and business finances, which is important for building business credit.
- Open a business bank account: Keep your personal and business finances separate by opening a dedicated business bank account.
- Obtain a business credit card: Using a business credit card responsibly can help establish credit for your business.
- Establish trade lines: Work with vendors and suppliers who report payment history to credit bureaus to establish trade lines. This will help build a strong credit history for your business.
- Pay bills on time: Just like with personal credit, paying bills on time is critical for building business credit.
- Get a business loan: Obtaining a business loan and making regular payments on time can help establish credit and increase your business's creditworthiness.
- Monitor your credit report: Regularly review your business credit report and dispute any inaccuracies or fraudulent activity.
- Build relationships with lenders: Building relationships with lenders can help you establish a credit history and access financing when needed.