Personal Credit Problems: How to Build Business Credit (Part 1)
Over the past four years, questions about how to build business credit ratings when you’ve had personal credit problems have increased dramatically. With millions losing jobs, homes, and health insurance, and experiencing a wide range of financial disasters, there is an upsurge in home-based business startups. Many companies are conceived, developed, and managed on kitchen tables.
Unfortunately, there are no accurate statistics for homepreneurs. In the 2010 census, we were asked if we worked from home rather than whether we owned a home-based business. That data, which will not be available until 2012 or 2013, will not provide useful statistics since many salespeople and contractors with various specialties work from their homes although they are not self-employed. There is no source for accurate post-credit crisis data. However, Emergent Research produced an excellent study 18 months ago.
A dearth of jobs means that people who never considered themselves entrepreneurs have figured out ways to start a business to support themselves and their families. While I have discussed microbusiness credit-building information previously, I’m going to delve in again because you’ve asked for it.
Before you begin to build business credit, evaluate your personal credit. Even if you’ve experienced a major financial trauma, you need to order your free credit reports from AnnualCreditReport.com so you know that everything on your credit reports is accurate. When we’ve endured a financial disaster, most of us tend to want to avoid what’s there because it’s too upsetting. However, you must know.
When you’re ordering your free credit reports from Equifax, Experian, and TransUnion through AnnualCreditReport.com, go slowly. Take care to not click any links to accidentally buy the pricey products they’ll try to sell you ... with one exception. Equifax will offer a one-time purchase of your Equifax FICO score. The cost: around $8.00. It will give you a gauge of your credit scores although all three credit reporting agencies compute scores using unique variables and the three scores will differ. If the information on all your credit reports is the same, your other scores should be within 20 or 30 points of your Equifax FICO score.
In recent years, other credit score brands have emerged to compete with FICO (Fair Isaac Company). Today, FICO remains the accepted standard for credit scores. The range for FICO scores is between 300 and 850. A brand with a different range is not a FICO score.
When you get your credit reports and your Equifax FICO score, the information may be better than you expected. Or it could be worse. The condition of your personal credit affects your business credit decisions. You need the facts. In my next post, I will begin to discuss your options based on the condition of your personal credit.
