Posts Tagged Payment History
Do Credit Inquires Hurt Your Credit Score?
Mike Clover asked:
A credit inquiry is an item on your credit report that shows with permission a creditor requested your free credit score report.
Not all credit inquiries affect your credit score:
You may notice when you pull your credit report there are inquiries on there from a business you are not familiar with. The only inquiry that affects your credit score is the one where you are applying for credit. This is considered a hard pull on your report.
Inquiries that affect your credit score:
There is only one type of inquiry that affects your score. This type of inquiry is applications for a mortgage, auto loan and other credit, by you authorizing these creditors to access your credit report. This type of inquiry prompted by your own actions ends up on your personal credit report and affects your score.
An inquiry that does not affect your credit score: Checking your own personal credit report or any business that offers goods and services that requests your report. A business that you already have a account with that requests a check. A potential employer that does credit checks. Some of these types of inquiries might show up on your report but do not affect your credit score.
Checking your credit report does not affect your score:
Checking your credit report on a regular basis to ensure it is accurate and error free is recommended by Fair Isaac the inventor of the FICO Score. Maintaining a error free report is part of credit management which will improve your credit rating over time. Ordering your credit report at CreditScoreQuick.com does not hurt your credit score.
How credit inquiries are factored in your Credit Score:
There are five types of information used to calculate your credit score. Each category accounts towards a percentage of your score.
Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
Types of Credit in use – 10%
New Credit – 10%
Don’t let inquires scare you. There is nothing wrong with shopping for a better rate, or better terms on a loan. As you can see in the about chart, payment history is the biggest factor in calculation process of your credit score. The second biggest factor is how much of your approved credit limits are charged up. But of course you don’t want to go out and start applying for every credit offer out there either. Be responsible and have a good mix of credit, but stay away from too much credit as well You really on need 3 lines of credit reporting on your report.
Example:
1. credit card
2. car note
3. installment loan
This type of credit mix accounts for 10% of your score.
Alvin
A credit inquiry is an item on your credit report that shows with permission a creditor requested your free credit score report.
Not all credit inquiries affect your credit score:
You may notice when you pull your credit report there are inquiries on there from a business you are not familiar with. The only inquiry that affects your credit score is the one where you are applying for credit. This is considered a hard pull on your report.
Inquiries that affect your credit score:
There is only one type of inquiry that affects your score. This type of inquiry is applications for a mortgage, auto loan and other credit, by you authorizing these creditors to access your credit report. This type of inquiry prompted by your own actions ends up on your personal credit report and affects your score.
An inquiry that does not affect your credit score: Checking your own personal credit report or any business that offers goods and services that requests your report. A business that you already have a account with that requests a check. A potential employer that does credit checks. Some of these types of inquiries might show up on your report but do not affect your credit score.
Checking your credit report does not affect your score:
Checking your credit report on a regular basis to ensure it is accurate and error free is recommended by Fair Isaac the inventor of the FICO Score. Maintaining a error free report is part of credit management which will improve your credit rating over time. Ordering your credit report at CreditScoreQuick.com does not hurt your credit score.
How credit inquiries are factored in your Credit Score:
There are five types of information used to calculate your credit score. Each category accounts towards a percentage of your score.
Payment History – 35%
Amounts Owed – 30%
Length of Credit History – 15%
Types of Credit in use – 10%
New Credit – 10%
Don’t let inquires scare you. There is nothing wrong with shopping for a better rate, or better terms on a loan. As you can see in the about chart, payment history is the biggest factor in calculation process of your credit score. The second biggest factor is how much of your approved credit limits are charged up. But of course you don’t want to go out and start applying for every credit offer out there either. Be responsible and have a good mix of credit, but stay away from too much credit as well You really on need 3 lines of credit reporting on your report.
Example:
1. credit card
2. car note
3. installment loan
This type of credit mix accounts for 10% of your score.
Alvin
Personal Credit Report – Credit Reporting Data From Many Sources
Hector Milla asked:
A personal credit report is a document that every person over the age of eighteen with a social security number has. When people open accounts or get issued loans their social security numbers are placed on file so that the history follows them for many years to come. In order to survive long term financially, people need to ensure that the data that is coming from sources is accurate or problems can arise.
Many sources report consumer data to the three major reporting credit bureaus about consumer credit information. Credit card companies, banks, courts, collection agencies, student loan lenders, mortgage servicing firms, etc. When a person makes a payment, this is directly reported within a few days of the check being cashed by the financial institution.
Every payment that consumers make or miss typically gets reported because most people have consumer accounts, loans, and other liabilities that need to be paid on time every month. A person’s financial rating depends on their amount of debt, open accounts, delinquencies, bankruptcies, and payment history. If a person has let too many payments lapse then their scores will be considerably low and they will be considered a risk to lend to. Many financial institutions pull their customers’ credit data report on a monthly basis. If a person has a bad rating then these companies can reduce money borrowed, increase interest rates, and deny additional cards from being issued. This can really impact wallets and checkbooks everywhere.
If people find inaccuracies in the data that is reported then they should dispute the negative items to the company that has issued the report. It is important to keep apprised on if the negative items were resolved because a few errors can reduce the overall score. Now even opening a cell phone account, getting Internet and cable access, and moving into a new apartment or home require a check of credit history so staying organized is crucial.
If you want to improve your scores you need a credit reporting service. This also helps to protect consumers from identity theft because it lists all the accounts that a consumer has in their name. Identity thieves commit fraud by stealing social security numbers, driver’s license numbers, and other forms of personal information to open new accounts without their victims’ knowledge. Prices are completely reasonable and negligible $15-25 per month for consumer reports and it is well worth the financial investment to ensure financial solvency.
Stella
A personal credit report is a document that every person over the age of eighteen with a social security number has. When people open accounts or get issued loans their social security numbers are placed on file so that the history follows them for many years to come. In order to survive long term financially, people need to ensure that the data that is coming from sources is accurate or problems can arise.
Many sources report consumer data to the three major reporting credit bureaus about consumer credit information. Credit card companies, banks, courts, collection agencies, student loan lenders, mortgage servicing firms, etc. When a person makes a payment, this is directly reported within a few days of the check being cashed by the financial institution.
Every payment that consumers make or miss typically gets reported because most people have consumer accounts, loans, and other liabilities that need to be paid on time every month. A person’s financial rating depends on their amount of debt, open accounts, delinquencies, bankruptcies, and payment history. If a person has let too many payments lapse then their scores will be considerably low and they will be considered a risk to lend to. Many financial institutions pull their customers’ credit data report on a monthly basis. If a person has a bad rating then these companies can reduce money borrowed, increase interest rates, and deny additional cards from being issued. This can really impact wallets and checkbooks everywhere.
If people find inaccuracies in the data that is reported then they should dispute the negative items to the company that has issued the report. It is important to keep apprised on if the negative items were resolved because a few errors can reduce the overall score. Now even opening a cell phone account, getting Internet and cable access, and moving into a new apartment or home require a check of credit history so staying organized is crucial.
If you want to improve your scores you need a credit reporting service. This also helps to protect consumers from identity theft because it lists all the accounts that a consumer has in their name. Identity thieves commit fraud by stealing social security numbers, driver’s license numbers, and other forms of personal information to open new accounts without their victims’ knowledge. Prices are completely reasonable and negligible $15-25 per month for consumer reports and it is well worth the financial investment to ensure financial solvency.
Stella
The Importance of a Business Credit Report
Francis Murphy asked:
A business credit report is a report that indicates the creditworthiness of a company. A document like this can be obtained from a bank or a credit reporting agency. The information contained a business entity’s current financial position and credit history as well as public records such as bankruptcies, foreclosures and judgments. Information for a credit report is largely culled from creditors and similar sources.
It is important for a business to maintain a solid report. A good business credit report can be critical to obtaining favourable financial terms for a business when creditors are reviewing its creditworthiness. A good credit history is also influential to help customers decide who to do business with. Credit reports can help businesses manage their credit risk, prevent fraud, target marketing offers and automate decision making. Essentially, this helps maintain the financial security of a business entity and is an indicator of the business’ financial health.
Business credit reports can be obtained from credit reporting agencies or credit bureaus. These companies provide and store personal credit histories as well as provide credit reports upon request. Unlike personal credit reports, permission is not required from business owners should a person wish to request a business entity’s credit report.
Those who request a business credit report are known as “end users” and they are not allowed to show the report to anyone else without permissible purpose. However, it is not illegal to resell credit reports, although the reseller must indicate the end user and their permissible purpose.
It is not enough to assume that a favourable personal credit score can secure your business a good business credit score. Every business should encourage its vendors to report your payment history to credit reporting agencies so that such information is on file. Separating your personal report from that of your business ensures that your personal credit standing will not be affected should your business face any risks.
Business credit needs to be constantly managed and monitored so that anyone who views your report receives current information.
Ida
A business credit report is a report that indicates the creditworthiness of a company. A document like this can be obtained from a bank or a credit reporting agency. The information contained a business entity’s current financial position and credit history as well as public records such as bankruptcies, foreclosures and judgments. Information for a credit report is largely culled from creditors and similar sources.
It is important for a business to maintain a solid report. A good business credit report can be critical to obtaining favourable financial terms for a business when creditors are reviewing its creditworthiness. A good credit history is also influential to help customers decide who to do business with. Credit reports can help businesses manage their credit risk, prevent fraud, target marketing offers and automate decision making. Essentially, this helps maintain the financial security of a business entity and is an indicator of the business’ financial health.
Business credit reports can be obtained from credit reporting agencies or credit bureaus. These companies provide and store personal credit histories as well as provide credit reports upon request. Unlike personal credit reports, permission is not required from business owners should a person wish to request a business entity’s credit report.
Those who request a business credit report are known as “end users” and they are not allowed to show the report to anyone else without permissible purpose. However, it is not illegal to resell credit reports, although the reseller must indicate the end user and their permissible purpose.
It is not enough to assume that a favourable personal credit score can secure your business a good business credit score. Every business should encourage its vendors to report your payment history to credit reporting agencies so that such information is on file. Separating your personal report from that of your business ensures that your personal credit standing will not be affected should your business face any risks.
Business credit needs to be constantly managed and monitored so that anyone who views your report receives current information.
Ida
What Is FICO and How Do I Fix My Credit Report?
Bud T Johnson asked:
In order to improve your credit scores which make up your credit reports it is important to understand the FICO business and scoring model.
FICO stands for Fair, Isaac and Company and was founded in 1956 by Bill Fair an engineer and Earl Isaac a mathematician. In 1958, they began selling the first credit scoring system these systems were used to help companies evaluate credit worthiness and they continued producing and selling these systems. In 1987, the company went public and created a new predictive general purpose credit scoring model affectionately known as the FICO score. This score was originally named the Beacon score and was used to determine which borrowers were most likely to default on a loan. In 2003, the companies name was changed to the Fair Isaac Corporation.
The general purpose FICO model was adopted by all three major credit bureaus Equifax, Transunion, and Experian. The FICO ranges between a low of 300 and a high of 850. The higher the score the better credit risk a borrower is considered. The FICO scoring model uses five factors to determine the likelihood of default. The five factors used to create your FICO score are: payment history; outstanding balances; length of history; type of credit; and inquires. The overall score is a weighted average of each of these factors. FICO breaks down with 35% of your overall result related to payment history, outstanding balances make up 30% of your result, the length of credit history has a 15% impact on your overall result, the type of credit has a 10% impact on your result, and the amount of inquiries accounts for the final 10% of your overall credit scores. Generally, a credit score of 720 and above is considered excellent, 680 – 720 is considered good, 620 – 680 is considered fair, and 619 and below is considered poor.
In 2006, the three credit bureaus created a company called VantageScore Solutions. This company was created to start a new credit scoring model to compete with FICO. The two companies have been in ongoing litigation regarding the two scoring methods and the results have not been finalized. However, a majority of businesses and lenders still use FICO as the main credit scoring model.
As a credit repair specialist I hear “Fix My Credit Report” all the time. In order to help achieve the highest credit results possible it is imperative that all consumers understand the FICO model.
Earl
In order to improve your credit scores which make up your credit reports it is important to understand the FICO business and scoring model.
FICO stands for Fair, Isaac and Company and was founded in 1956 by Bill Fair an engineer and Earl Isaac a mathematician. In 1958, they began selling the first credit scoring system these systems were used to help companies evaluate credit worthiness and they continued producing and selling these systems. In 1987, the company went public and created a new predictive general purpose credit scoring model affectionately known as the FICO score. This score was originally named the Beacon score and was used to determine which borrowers were most likely to default on a loan. In 2003, the companies name was changed to the Fair Isaac Corporation.
The general purpose FICO model was adopted by all three major credit bureaus Equifax, Transunion, and Experian. The FICO ranges between a low of 300 and a high of 850. The higher the score the better credit risk a borrower is considered. The FICO scoring model uses five factors to determine the likelihood of default. The five factors used to create your FICO score are: payment history; outstanding balances; length of history; type of credit; and inquires. The overall score is a weighted average of each of these factors. FICO breaks down with 35% of your overall result related to payment history, outstanding balances make up 30% of your result, the length of credit history has a 15% impact on your overall result, the type of credit has a 10% impact on your result, and the amount of inquiries accounts for the final 10% of your overall credit scores. Generally, a credit score of 720 and above is considered excellent, 680 – 720 is considered good, 620 – 680 is considered fair, and 619 and below is considered poor.
In 2006, the three credit bureaus created a company called VantageScore Solutions. This company was created to start a new credit scoring model to compete with FICO. The two companies have been in ongoing litigation regarding the two scoring methods and the results have not been finalized. However, a majority of businesses and lenders still use FICO as the main credit scoring model.
As a credit repair specialist I hear “Fix My Credit Report” all the time. In order to help achieve the highest credit results possible it is imperative that all consumers understand the FICO model.
Earl
Establishing Business Credit – The Seven Steps to Success
Keith McAslan asked:
Business versus Personal Credit:
Personal – Personal credit building starts when an individual provides their social security number and applies for their first credit card. At that point a credit profile is started with the personal credit reporting agencies in the region of the country in which they reside. This profile, also commonly known as a “credit report”, is built with every credit inquiry, credit application submitted, change of address and job change. The information contained in the report is usually reported to the credit bureaus by those businesses issuing credit. Eventually, the credit report is viewed as a statement or report of an individual’s ability to pay back a debt, and is the key tool to access and grant credit.
Business – When a business issues another business credit, it is referred to as trade credit (credit from vendors or suppliers). Trade, or business, credit is the single largest source of lending in the world, but it typically not reported to the business credit agencies by most small businesses. The data regarding trade credit transactions must be submitted and then is accumulated by the business credit bureaus to create a business credit report using the business name, address and federal tax identification number (FIN). The credit bureaus use this data to generate a historical report about a company’s business credit transactions and payment history. Typically, the businesses issuing credit rely on the business credit report to determine the credit they are willing to grant and the amount of the credit limit. Additionally, many businesses (suppliers/vendors) will submit credit reference applications to the key suppliers of the business as a method to obtain payment patterns as part of the credit granting process.
The major credit bureaus are:
Dun & Bradstreet Business Credit USA Corporate Experian Small Business Equifax TransUnion (Personal)
The information provided to the business credit bureaus (primarily D&B) is sent in voluntarily, as businesses are not required to report. Therefore, credit bureaus may never receive any information about the business transactions on credit and a business could go for years accumulating business history without being reported to the credit bureaus and establishing a positive business history of sound credit practices.
Establishing Business Credit History:
Business credit scores range on a scale from 0 to 100 with 75 or more considered an excellent rating. Personal credit scores, on the other hand, range from 300 to 850 with a score of 680 or higher considered excellent. With today’s tighter credit scrutiny the higher the credit score, the more likely an individual or business is to obtain credit and at more favorable terms (interest rate and contract length).
While it is important to know that there are many factors http://www.myfico.com that affect a credit score; it’s based on more than just whether you pay your bills on time (still very important). The credit score will be affected by the amount of available credit you have on bank lines of credit and credit cards, the length of time you’ve had a credit profile, the number of inquiries made on your credit profile, paying the bills on time, bankruptcy, as well as other considerations.
The typical American consumer credit report receives two to three credit inquiries per year and usually has 11 credit obligations – typically broken down as 7 credit cards and 4 installment loans. Business owners are not your typical consumer, because they carry both personal and business credit. This typically doubles the number of inquiries made to their personal credit profile and the number of credit obligations they carry at any given time, all of which negatively impact the personal credit score. Additionally, because business inquiries and personal inquiries are not separated on the personal credit report, the personal credit scores are negatively impacted. As mentioned earlier, using the personal credit history to get credit for their business, businesses are not able to build their business history/score, all of which could help attain critical business credit in the future.
A critical mistake many business owners make is using their personal information to apply for business credit, leases and loans. This practice has the resultant impact of potentially lowering their personal credit score, while not building a business credit history and business credit score.
A key to establishing credit for the business and a profile and score is to find companies (UPS, FEDEX, etc.) or your key supplier and vendors that will grant credit for your business without using your personal credit information and then report the payment experiences to the business credit bureaus. By reporting the information to the proper credit bureaus, those companies will help the business establish a business credit profile and score.
The Seven Steps to Success:
1. Company Legal Structure – The business must be a legal entity unto itself in order to establish business credit. Therefore, it is recommended to form a corporation (C Corp) or LLC (discuss with your CPA the advantage/disadvantages of a C Corp versus LLC) as opposed to structuring your business as a sole proprietorship or partnership. Formation of a sole proprietorship or partnership, dictates that personal credit information could be included on the business credit report. Additionally, as a sole proprietor or partner in a partnership, you are personally liable for the debts of the business and all your personal assets are at risk in the event of litigation.
Corporations and LLC’s, on the other hand, provide the business owners liability protection, and can build a business credit profile that’s separate from the personal credit profile. Therefore, apply for credit under your business’s name and find businesses will to grant credit without a personal credit check or guarantee.
2. Register with Business Credit Agencies – The best known business credit bureau is Dun & Bradstreet. Dun & Bradstreet has a process on their web site to establish a D-U-N-S number (a specific 9 digit number related to your business) and instructions how to establish a business credit rating. It is strongly recommended that you contact D&B and follow their process to establish business credit. The following is from the D&B web site:
How do I get started with D&B? With our unsurpassed global data collection system, D&B continually gathers the data that initiates the creation of business credit profiles on new companies. Many kinds of activities can trigger a profile on a new company, such as incorporating your business, applying for a loan, getting a business telephone number, taking out a lease on office space – even just when another company seeks information from D&B about your business. Still, a new business may not have a complete business credit profile. Getting a D-U-N-S Number from D&B – the worldwide standard for business classification systems – is an essential part of helping you establish your business credit profile and will ensure that when a company looks you up in the D&B database they will find you. In some cases, a D&B D-U-N-S Number is so a requirement for doing business some entities, such as the US government.
You should make sure you have a D&B business credit profile if:
You are planning to obtain a business loan You need to purchase or lease equipment Your cash flow is tight You want to ensure you are getting a fair deal from lenders compared to your competition You want to pay net 30 days instead of COD (Cash On Delivery) You are paying interest at prime plus 1, or even higher You plan to do business with entities that require a D-U-N-S Number, e.g. the US Government
These issues and dozens other like them can be addressed by having a strong business credit profile. A good rating provides you with the financial freedom to take the steps you need to grow, and is a straightforward, unbiased method for other companies to assess your level of risk when considering taking you on as a creditor. A poor credit rating is a certain barrier to growth and success, preventing you from getting adequate funding on fair terms.
Communicating directly with D&B will help establish your business credit in less time. If you are a new company, D&B can help you build a complete business credit profile from the ground up; if you have been in operation for a while, you will want to improve and/or protect your business credit profile. Find out more about how to establish, monitor, improve, or protect your business credit.
3. Credit Market Requirements – Businesses must meet all the requirements of the credit market in order to have a higher probability of credit approval, as not being in compliance with the credit market can “send up signal flares” with both credit bureaus and potential grantors of credit.
Some of the “signal flares” include:
not having a business license, not being registered with the Secretary of State for a certificate of good standing, operating under your social security number rather than a FIN or EIN, not having a phone line (land line) that is listed in the phone directory in the exact business legal name, no web site, or not having a business email address (not AOL or gmail, but a specific URL for your company).
4. Small Business Credit Lines – Investigate and locate a minimum of five businesses (vendors/suppliers) willing to grant a small business credit without personal guarantees and will report the payment experiences to the business credit bureaus. This will assist your business to establish a credit report and build a financial credit foundation for the company. Find companies willing to grant credit that report to the credit bureaus such as marketingoncredit.com, UPS, FEDEX
5. Business Credit Cards – Obtain three business credit cards (Sam’s Club Discover Business card), that are not linked to you personally and that report the business credit to the reporting agencies. Then be sure to always pay your bills on time!
6. Financial Statements, Business Plans and Loan Packages – These documents are often required by many credit grantors as part of their loan application process. CxO To GO is a national professional services firm that has assisted many business with their financial statement preparation and business plans. Additionally, CxO To Go has packages such as PowerPlan and PowerPlan2 for business plans, PowerPuncher for executive summaries, CFOCast for financial projections and BankSell for bank proposals so lenders and bankers will take action. It is important to note that 61% of all businesses are turned down for a loan due to a poor loan package, however with BankSell the lender loan package gets results and moves the applicant to the top of the list for review and credit committee approval.
7. Debt management – Be a smart money manager and manage the debt levels to ensure they are not too burdensome and can be paid back with current cash flow. Do not incur debt that will over leverage the company and cause missed or late payments.
Jesus
Business versus Personal Credit:
Personal – Personal credit building starts when an individual provides their social security number and applies for their first credit card. At that point a credit profile is started with the personal credit reporting agencies in the region of the country in which they reside. This profile, also commonly known as a “credit report”, is built with every credit inquiry, credit application submitted, change of address and job change. The information contained in the report is usually reported to the credit bureaus by those businesses issuing credit. Eventually, the credit report is viewed as a statement or report of an individual’s ability to pay back a debt, and is the key tool to access and grant credit.
Business – When a business issues another business credit, it is referred to as trade credit (credit from vendors or suppliers). Trade, or business, credit is the single largest source of lending in the world, but it typically not reported to the business credit agencies by most small businesses. The data regarding trade credit transactions must be submitted and then is accumulated by the business credit bureaus to create a business credit report using the business name, address and federal tax identification number (FIN). The credit bureaus use this data to generate a historical report about a company’s business credit transactions and payment history. Typically, the businesses issuing credit rely on the business credit report to determine the credit they are willing to grant and the amount of the credit limit. Additionally, many businesses (suppliers/vendors) will submit credit reference applications to the key suppliers of the business as a method to obtain payment patterns as part of the credit granting process.
The major credit bureaus are:
Dun & Bradstreet Business Credit USA Corporate Experian Small Business Equifax TransUnion (Personal)
The information provided to the business credit bureaus (primarily D&B) is sent in voluntarily, as businesses are not required to report. Therefore, credit bureaus may never receive any information about the business transactions on credit and a business could go for years accumulating business history without being reported to the credit bureaus and establishing a positive business history of sound credit practices.
Establishing Business Credit History:
Business credit scores range on a scale from 0 to 100 with 75 or more considered an excellent rating. Personal credit scores, on the other hand, range from 300 to 850 with a score of 680 or higher considered excellent. With today’s tighter credit scrutiny the higher the credit score, the more likely an individual or business is to obtain credit and at more favorable terms (interest rate and contract length).
While it is important to know that there are many factors http://www.myfico.com that affect a credit score; it’s based on more than just whether you pay your bills on time (still very important). The credit score will be affected by the amount of available credit you have on bank lines of credit and credit cards, the length of time you’ve had a credit profile, the number of inquiries made on your credit profile, paying the bills on time, bankruptcy, as well as other considerations.
The typical American consumer credit report receives two to three credit inquiries per year and usually has 11 credit obligations – typically broken down as 7 credit cards and 4 installment loans. Business owners are not your typical consumer, because they carry both personal and business credit. This typically doubles the number of inquiries made to their personal credit profile and the number of credit obligations they carry at any given time, all of which negatively impact the personal credit score. Additionally, because business inquiries and personal inquiries are not separated on the personal credit report, the personal credit scores are negatively impacted. As mentioned earlier, using the personal credit history to get credit for their business, businesses are not able to build their business history/score, all of which could help attain critical business credit in the future.
A critical mistake many business owners make is using their personal information to apply for business credit, leases and loans. This practice has the resultant impact of potentially lowering their personal credit score, while not building a business credit history and business credit score.
A key to establishing credit for the business and a profile and score is to find companies (UPS, FEDEX, etc.) or your key supplier and vendors that will grant credit for your business without using your personal credit information and then report the payment experiences to the business credit bureaus. By reporting the information to the proper credit bureaus, those companies will help the business establish a business credit profile and score.
The Seven Steps to Success:
1. Company Legal Structure – The business must be a legal entity unto itself in order to establish business credit. Therefore, it is recommended to form a corporation (C Corp) or LLC (discuss with your CPA the advantage/disadvantages of a C Corp versus LLC) as opposed to structuring your business as a sole proprietorship or partnership. Formation of a sole proprietorship or partnership, dictates that personal credit information could be included on the business credit report. Additionally, as a sole proprietor or partner in a partnership, you are personally liable for the debts of the business and all your personal assets are at risk in the event of litigation.
Corporations and LLC’s, on the other hand, provide the business owners liability protection, and can build a business credit profile that’s separate from the personal credit profile. Therefore, apply for credit under your business’s name and find businesses will to grant credit without a personal credit check or guarantee.
2. Register with Business Credit Agencies – The best known business credit bureau is Dun & Bradstreet. Dun & Bradstreet has a process on their web site to establish a D-U-N-S number (a specific 9 digit number related to your business) and instructions how to establish a business credit rating. It is strongly recommended that you contact D&B and follow their process to establish business credit. The following is from the D&B web site:
How do I get started with D&B? With our unsurpassed global data collection system, D&B continually gathers the data that initiates the creation of business credit profiles on new companies. Many kinds of activities can trigger a profile on a new company, such as incorporating your business, applying for a loan, getting a business telephone number, taking out a lease on office space – even just when another company seeks information from D&B about your business. Still, a new business may not have a complete business credit profile. Getting a D-U-N-S Number from D&B – the worldwide standard for business classification systems – is an essential part of helping you establish your business credit profile and will ensure that when a company looks you up in the D&B database they will find you. In some cases, a D&B D-U-N-S Number is so a requirement for doing business some entities, such as the US government.
You should make sure you have a D&B business credit profile if:
You are planning to obtain a business loan You need to purchase or lease equipment Your cash flow is tight You want to ensure you are getting a fair deal from lenders compared to your competition You want to pay net 30 days instead of COD (Cash On Delivery) You are paying interest at prime plus 1, or even higher You plan to do business with entities that require a D-U-N-S Number, e.g. the US Government
These issues and dozens other like them can be addressed by having a strong business credit profile. A good rating provides you with the financial freedom to take the steps you need to grow, and is a straightforward, unbiased method for other companies to assess your level of risk when considering taking you on as a creditor. A poor credit rating is a certain barrier to growth and success, preventing you from getting adequate funding on fair terms.
Communicating directly with D&B will help establish your business credit in less time. If you are a new company, D&B can help you build a complete business credit profile from the ground up; if you have been in operation for a while, you will want to improve and/or protect your business credit profile. Find out more about how to establish, monitor, improve, or protect your business credit.
3. Credit Market Requirements – Businesses must meet all the requirements of the credit market in order to have a higher probability of credit approval, as not being in compliance with the credit market can “send up signal flares” with both credit bureaus and potential grantors of credit.
Some of the “signal flares” include:
not having a business license, not being registered with the Secretary of State for a certificate of good standing, operating under your social security number rather than a FIN or EIN, not having a phone line (land line) that is listed in the phone directory in the exact business legal name, no web site, or not having a business email address (not AOL or gmail, but a specific URL for your company).
4. Small Business Credit Lines – Investigate and locate a minimum of five businesses (vendors/suppliers) willing to grant a small business credit without personal guarantees and will report the payment experiences to the business credit bureaus. This will assist your business to establish a credit report and build a financial credit foundation for the company. Find companies willing to grant credit that report to the credit bureaus such as marketingoncredit.com, UPS, FEDEX
5. Business Credit Cards – Obtain three business credit cards (Sam’s Club Discover Business card), that are not linked to you personally and that report the business credit to the reporting agencies. Then be sure to always pay your bills on time!
6. Financial Statements, Business Plans and Loan Packages – These documents are often required by many credit grantors as part of their loan application process. CxO To GO is a national professional services firm that has assisted many business with their financial statement preparation and business plans. Additionally, CxO To Go has packages such as PowerPlan and PowerPlan2 for business plans, PowerPuncher for executive summaries, CFOCast for financial projections and BankSell for bank proposals so lenders and bankers will take action. It is important to note that 61% of all businesses are turned down for a loan due to a poor loan package, however with BankSell the lender loan package gets results and moves the applicant to the top of the list for review and credit committee approval.
7. Debt management – Be a smart money manager and manage the debt levels to ensure they are not too burdensome and can be paid back with current cash flow. Do not incur debt that will over leverage the company and cause missed or late payments.
Jesus
Personal loans for bad credit-Chicago area only?
jds asked:
I have less than perfect credit (about 530 credit score). I am now trying to improve that score. I have a great job and make very good money. I am looking to get a personal loan for about $5,000. I would like to get this loan for a purchase but also to have the positive payment history on my credit report and bump up my score.
I have less than perfect credit (about 530 credit score). I am now trying to improve that score. I have a great job and make very good money. I am looking to get a personal loan for about $5,000. I would like to get this loan for a purchase but also to have the positive payment history on my credit report and bump up my score.
Does anyone know of any banks in the Chicago area that may be able to help?
Also, the purchase I am making will not allow me to use a credit card. It must be a cashier’s check or cash.
Thank you!
Tommy