Gain and Maintain a Great Credit Score
Strong credit is a valuable tool to establish your business. Access to a favorable loan at the right time can mean the difference between stagnation or acceleration. Apply these tips to keep an enviable score.
Incorporate Your Business
It may be the path of least resistance to operate as a sole proprietor when starting off. However, you’ll be operating within the confines of your personal credit history and all the bumps and bruises you got along the way.
Setting your business up as an LLC protects your personal assets and allows your business to be its own entity. You can apply your years of experience to avoid past mistakes as you’re building credit in your small business. Be sure to get a federal taxpayer identification number (TIN/EIN) for tax purposes.
Open Business Accounts
Now that you have essential legalities in place, you should open a business bank account. Obtain a business credit card to start creating a credit history. Many financial institutions have attractive packages for opening checking accounts and signing up for their credit card, so shop around for the best deals and rewards that will suit your needs.
Set a good foundation for a high score by using the card regularly for small necessary purchases and then paying off the balance immediately. Lenders want to see responsible and consistent use of credit to feel comfortable approving you for a future loan.
Monitor Your Credit Regularly
With the ever-present threat of identity theft, your business is at risk so set up proper vigilance and protection. Open a business credit file so you can monitor your activity with the three reporting agencies (Experian, Equifax, and TransUnion). You can keep on the watch for any inconsistencies or unauthorized activity by purchasing reports every two to three months.
Alternatively, it would be wise to invest in a service that monitors your credit report and sends alerts so you can respond to suspicious activity immediately and not suffer irreparable damage. Monitoring services also use simulators to let you know how adjustments you make will likely affect your credit. Did you know that taking on new hires can affect your score? Even moving locations could cause your number to rise or dip. As you’re building credit, you should be aware of the consequences of your decisions for the near and long-term future.
You’re juggling a lot of items as you start your business, and your credit may be a concern that slips to the wayside. Make building good credit a priority from the start.