Three Steps to Starting Your New Business With a Clean
Credit Score
by Michael G. Peterson
Published on this site: January 9th, 2006 - See
more articles from this month
For many people, starting their own business is a personal
dream. Before fulfilling your personal dream, it's necessary
to get your personal finances in order. At this early stage
you'll be using your own personal finances to start your business
and if you want to succeed you must approach your personal finances
with a professional eye.
Avoid funding start-up expenses via credit and running up
huge credit card debt. Instead you should apply for a business
loan, which has the benefit of being a one-time loan with
typically lower interest rates than a credit card. However,
in order to get good terms on your loan, you will have to
have your credit card debt in order first.
Without an established business credit history, lenders will
have to look to your personal credit to negotiate your terms.
You don't want personal credit problems starting your business
credit off on a bad foot.
Three Steps to Starting Your New Business With a Clean
Credit Score
A clean credit score will help you get the low interest rates
you need to start your business on solid financial ground.
- Pay off your credit card debt.
Once you know where your credit weaknesses lie, zero in
on them to start improving your standing. Your goal will
be to completely eliminate all credit card debt. It may
seem like an insurmountable task, but in reality, paying
it off as fast as you can is actually easier and less expensive
than paying it off over a period of many years.
First, start paying double the monthly minimum on the balance
with the highest interest rate, while paying the minimum
monthly due on everything else. By paying down that highest-interest
balance, you will save yourself from potentially spending
thousands extra in interest - and you'll be done in half
the time. Once you have paid off that balance, move on to
the one with the next highest interest, and so on down the
line. Eventually you will enjoy the freedom of zero credit
card debt. In fact, if you find yourself having a hard time
staying away from credit card purchases - take them out
of your wallet and bury them in your closet until you have
improved your financial situation.
- Check your credit report.
Have you seen your credit report? You can get a copy of
yours by visiting http://www.freecreditreport.com.
Look over it carefully to make sure there are no mistakes
that could have negative effects on your credit and your
interest rate.
If you find any mistakes, you may dispute them through the
credit-reporting agency. The creditor then has 30 days in
which to respond to your dispute. If they fail to respond
within 30 days, the disputed information is expunged. If
it is a particularly old debt, creditors may not even bother
to respond. Disputing credit report mistakes is definitely worth a try
since you have nothing to lose but bad credit.
- Pay bills on time.
Your credit is not based solely on your ability to pay off
your credit card debt. You must also demonstrate that you
are responsible when paying your bills: utility bills, car
payments, and rent for example. Try to pay all of these
on time and in full and it will reflect well on your credit
report. If you have trouble remembering to pay your bills
on time, try to keep them all in a highly visible place
so you will have a constant reminder to pay them.
Many utility bills may be paid online these days, so you
can simply check with your utility companies to set up automatic
payments. Not only do you maintain good credit by paying
on time,but you also avoid paying late fees, and saving
money is always a wise financial move!
Before you establish your own business, it is imperative
that you begin with a clean slate: no debt, healthy credit,
and responsible financial habits. When you have a good credit
score to begin with, your business will have a stronger start
and will be easier to run. Good finances mean success. Best
of luck with your new business venture!
Michael G. Peterson is the Vice President of American
Credit Foundation, an IRS 501 (c)(3) non-profit consumer credit
counseling organization that has assisted thousands of individuals
and families with their financial situations through seminars,
education, counseling services, and, debt management plans. For more information, and free consumer resources visit
http://www.debtguru.com
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