It’s crucial for one to be aware of and understand how to use credit, your credit report is a summary of your credit history. It lists your name, addresses and social security number (SSN), in addition, lenders ask for your SSN when you’re applying for a credit card or a loan. SSN is a numerical identifier assigned to US citizens and other residents. Furthermore, it verifies your identity and accesses your credit report. Social Security Number is helpful when compiling your credit history because it’s the only identifier assigned to each US consumer.
Credit Scores often require three to six months of activity to be reported before the account will be included in calculations. Additionally, soft inquires of personal credit don’t affect consumer credit scores personal credit scores are based upon FICO scoring models.
Identifying Credit
- Establishing – Cash only payments
- Repairing – Poor score. Taking necessary steps to improve score.
- Building – Utilizing credit cards, store cards and other recurring payments that are reported to credit agencies.
Of course, the best thing you can do to build or improve your credit file is to make each and every periodic payment on time. This applies to both personal and business credit.
Credit Scores
There are different business and consumer scoring models. So, some factors may not carry much weight or may not be used at all. Get business scores at NAV.com free consumer credit reports can be requested once a year.
- DUNs Number (Data Universal Numbering System) – Business credit reporting agency.
- EIN (Employer Identification Number) – Issued by the IRS (Internal Revenue Service). And used for tax identification purposes.
Consumer and business credit score both rank creditworthiness. Anyone can check a business score unlike personal scores with a “Permissible Purpose” under federal law. Like personal credit, business credit is a great asset and should be monitored consistently. Just as your personal FICO scores can impact your ability to secure financing, your business FICO SBSS scores can impact your ability to get business funding.
Business Profile
A Limited Liability Company (LLC) is business structure allowed by state statue legally exists as separate entity from its owners. Additionally, LLCs are taxed on a “Pass-Through” basis meaning all profits and losses are filed through the members personal tax return. However, a sole Proprietor has no legal entity.
Small business lenders will take into account your personal credit score. In addition, the Small Business Association (SBA) does not specify a minimum credit score required to secure an SBA loan. Furthermore, consumer credit scores and business credit profile will be a part of any business creditworthiness decision.
Bad Scores Factors
- Different credit profile (Owners)
- Late Payments
- Collections
- Bad Personal Credit
- Little to no credit history
- Company Profile
- High Credit Utilization
Steps to improve Credit Health
- Monitor your credit
- Separate your business and personal credit use.
- Look for ways to establish business credit accounts.
- Use the credit you need and make timely payments.
Business Credit Profile – Selection of credit scores that represent how your business meets its financial obligations. Business credit reporting is different than consumer credit reporting. Scores will vary depending on the reporting agencies. They won’t be identical. Although they will all look at the same data. They might weight it differently. And some factors may not be used at all.
Finally, actively build your business credit history and improve the metrics that matter to lenders. Regular monitoring of your credit profile becomes really important to make sure the information reported about your business is accurate and up to date. any verifiable errors you find in your credit report can be corrected.
Pingback: Taking Advantage of Your Score - Solid Grounds LLC