Published By Credit Suite at March 1, 2016
Your personal credit matters when establishing and building business credit. With that in mind, here are a few tips for putting your best foot forward with your personal credit.
If you have “bad credit”, you’ll have more work ahead of you, but the work will certainly pay off. Fixing your credit is one of the best things you can do for yourself, and even for your business, as it will make financing of all kinds cheaper (more affordable) and more accessible.
For those with bad credit, here’s what to do:
1. The first step is to dispute and remove incorrectly listed negative information on your credit report. According to the FCRA, you have a right to ensure that every item listed on your credit report is accurate, complete, verifiable, and timely. This process can be time consuming and people often need professional help, but the results are usually worth the trouble.
2. The next thing you should do is make sure you are building credit with new positive accounts. This means building good positive credit history to replace your old negative credit history. This is something you should start immediately. Don’t wait until everything is “cleaned up” to start building credit. Positive accounts help.
3. Lastly, you should make sure that your balances on revolving accounts are not too high. “Credit utilization”, or the amount of debt you have compared to your available high credit, accounts for over 30% of your consumer credit score.
4. Keep new credit applications to a minimum, because too many inquiries in a short amount of time will hurt your credit score.
If you already have good credit but just need to boost your score, here are a few things to consider:
1. Make sure your credit utilization isn’t too high. Too much debt can hurt you here. You can change this and boost your score by either opening up a new credit line and raising your “high credit limit” or requesting a credit limit increase or two on existing accounts. This will bring your credit utilization percentage down. Another way to lower your credit utilization is to pay off debt… but that isn’t always possible to the extent necessary to help your credit utilization.
2. Limit inquiries to a minimum. Don’t apply for a bunch of new credit or credit cards, loans, etc. Doing so will hurt your credit score and make you look desperate which could jeopardize your ability to get even business credit if you aren’t careful.
3. Keep making payments on time, keep monitoring your credit. Basically, take good care of the accounts you have.
4. If you have never had an installment loan such as for a car on your credit, getting one may help your score a little. If your credit usage is spread over multiple types of credit, your score will do better.
Whether you have fine credit or have hit some bumps in the road, minding your personal credit now will pay big dividends later both for your personal credit and your efforts to build business credit.