Other legal structures require you to establish an Employer Identification Number EIN , which will allow your business to start building its own credit profile more on that below. The longer your business credit history, the more likely it is that you can apply for credit products without providing personal credit information.
How to Build Credit in 10 Ways
Even if you are a sole proprietor, you can establish an EIN and start building your business credit score. As noted above, your business can have its own credit score.
The system works somewhat similarly to your personal credit score, although there is no industry standard for reporting a business credit score the way there is for personal credit. This means each business credit bureau reports your score a bit differently. Things like paying bills on time, your industry, and the kind of debt your business carries all factor into your business credit score.
Just like your personal credit score, business credit takes time to build, and you'll want to start thinking about establishing a good business credit history early if you know you need to apply for a loan. If you've been in business long enough to have a good business credit score, you have a much better chance of getting a loan or a new credit card without needing to supply your Social Security Number for a personal credit check. But realistically, you'll probably need to open at least a small-business credit card to establish a good business credit history in the first place.
This means your personal credit score does affect your chances of getting approved.
Why is credit important?
Generally, the best small-business credit cards require a score of or higher. While you might be able to qualify for a card with a lower score, you'll likely pay a higher interest rate or earn fewer rewards. When it comes to getting a small-business loan , banks have higher approval requirements. In general, banks consider small businesses a risky investment, which means they often ask for a personal guarantee -- and may even expect you to put up personal collateral such as your house or car.
Start planning early to make sure both your business and personal finances are in good shape before you apply for a small-business loan.
Whether or not your business credit products are tied to your personal credit history, follow the same good credit practices with your small-business credit card or loan that you would with your personal credit products. Late payments can put a serious dent in your credit score, so make sure you stay on top of all your bills in order to build strong credit. In fact, there are some simple methods for getting started.
The views and statements expressed are deemed reliable as of the publish date indicated and may not be accurate or reliable at any future date.
How To Establish Good Credit
The views and statements provided are those of the author. Discussions regarding any financial information provided are not intended as individual recommendations and do not reflect the views or advice of Atlantic Bay Mortgage Group, L. The views expressed are subject to change at any time in response to changing circumstances in the market. Atlantic Bay Mortgage Group, L.
Why your credit score matters | FTC Consumer Information
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