PERSONAL VS. BUSINESS CREDIT
Just like you a company has a credit score. Your score is your personal credit score why the company acquires a business credit score. There is no need to intermingle the two, and with proper development a business owner will have a completely separate score individual from the business. A business credit score is tracked through the payment history of the business. This is not to be confused with the bills that the owner pays out as “business expenses”. (Cell phone used for work signed under personal social security is a great example of what is NOT considered to be applicable towards business credit scoring).
A business credit score is just as equally important to protect as any other business asset. It takes patience and detail to be able to completely separate the personal expenses from the bills, especially in a small one or two person company. It is recommended to start with utility bills which are for the most part a fixed expense for the business. If this step is already covered go on to eliminating the use of any revolving accounts which carry the owners’ social security on file.
The difference between personal credit and business credit should be treated just like it sounds. Personal credit should be used for your car, house, children’s college, and others. Business credit needs to focus on serious business purchases and expenses. Without the separation what happens when the business fails and personal credit is involved? Down goes the captain of the ship.
Regardless of an owner’s personal credit score, corporations acquire their own credit rating, and build a separate credit history. Credit ratings assess credit worthiness of individuals or corporations based on financial history, current assets and liabilities. They reflect the ability to pay back a loan and have been used for insurance premiums and sometimes pre-employment verification. The higher the risk, the higher the interest rates will be.
About the Author:Over the course of the last 5 years as an entrepreneur I have successfully launched, managed, and sold off several businesses. Each organization started has added some value to my understanding of the business world today. My philosophy has been that 9 things out of 10 that I try will fail, but that golden one is always worth the battle. In my experience that has proven to be the case and my successful businesses still operate today under the management of those whom I have sold off to. The latest project is Initial Underwriting Group, a corporation comprised of two concepts: 1) business credit building and 2) business loan underwriting.
Article Source: ArticlesBase.com - PERSONAL VS. BUSINESS CREDIT