Many people in business experience damage to their personal credit profile due to operating their business. Wide swings in business credit card balances can cause “Credit Disaster”. In fact, millions of small business owners have damaged their personal credit profiles due to using personal credit for business resources.
A lot of credit card providers report business credit card data to the personal credit bureaus. As the business owner uses the business credit card(s) to cover marketing and other expenses, the Debt to Credit Ratio of the business is raised. This may lower credit scores. Lower credit scores eventually leads to lower Limits, financing denials, etc.
The business owner may become appealing only to the toxic “sharks”. Circling financials sharks that target the business for expensive loans.
The Cost of Poor Credit
Is your credit report costing you thousands of dollars each year on extra interest, fees, points, and term length? This is a real issue. It may be time to establish Business Credit.
According to a recent article from CBS Philadelphia poor credit is costing Americans thousands of dollars each year. See below:
“Americans with a credit score of 620 or lower pay roughly $3,400 more per year in higher loan interest rates and insurance premiums, according to a new study from Bankrate, amounting to what the financial services company calls a “subprime tax.” Over a lifetime, that can add up to more than $100,000 in added interest on credit cards, mortgages and auto loans, and higher home and auto insurance premiums. Is a Credit Score Calculated? A credit score is based on your credit report information, usually from the three most prominent credit bureaus in the United States: TransUnion, Equifax and Experian.”
The most common calculation of a credit score uses the following five factors:
- Payment history — 35 percent: Often the most important part of your credit score, payment history tells lenders if you have a history of paying your debts on time.
- Amounts owed — 30 percent: the FICO metrics looks at the “Credit Utilization Ratio,” which is the percentage of available credit that is currently being used.
- Length of credit history — 15 percent: In general, the longer your credit history, the better.
- Credit mix in use — 10 percent: The credit mix looks into the types and number of credit accounts owned.
- New credit — 10 percent: Opening multiple new lines of credit in quick succession can negatively affect a credit score.
Start Building Effective Business Credit Scores
Join Advanced Business Builder
Advanced Business Builder is packed with game-changing features and benefits. This dynamic small business program helps you position your business for better business ratings, appearance to finance provider’s and operational efficiency.
There are many reasons for this. We can help you spot the issues. Schedule a free consultation to discuss how we help can transform, optimize and empower your business.
- Stronger Cash Flow Management
- Business Credit Building
- Resource Building
- Business Portal Access
Take pressure off personal credit with a robust business credit profile. Build strong profiles with Dun & Bradstreet, Moody’s Analytics, Business FICO, Equifax Small Business, and Experian Commercial. Call (866) 345-0150 or write sales@advancedbusinessbuilder.com for a free initial consultation.