Business Credit Versus Personal Credit: What's the Difference?
Most people make the mistake of applying for a business loan using only their personal information. If your personal credit is poor, this can lower your chance of getting a business loan. Others use only personal credit cards and bank accounts for business needs. This is a big mistake because your goal is to build small business credit. You can always study books or articles on how to build business credit ideas and understand the importance of your small business credit.
When a person applies for a personal credit card for the first time, a personal credit profile is created. Until a person applies for any sort of credit or loan for the first time, the credit reporting services often look at the person as what is called a "ghost" in the credit industry. Thereafter, each activity that relates to the credit worthiness is recorded to that profile.
Some examples of what will begin to show on your credit profile are how well you repay credit, if you skip monthly payments or if you are delinquent on certain accounts. These activities are recorded by credit bureaus and stored by the individual's social security number. Eventually, this credit profile becomes the determining factor for obtaining loans by the person – be it for his or her personal use or business needs. Before issuing business loans, the credit issuing companies, banks and lenders check both the personal and business credit rating of the person using first the person's social security number and then the EIN (Employer Identification Number) that is issued to a company via the Internal Revenue Service.
One of the best build business credit ideas is to keep your business separate from your personal activities and try to stay current in both areas by paying loan installments promptly. You can always check your credit rating at MyFico, however, keep in mind this website does charge a fee and may entice you into joining a monthly plan. You can also obtain a free copy of your credit report from all three credit bureaus (TransUnion, Equifax, and Experian) annually from the Federal Trade Commission.