4 Personal Credit Tips for Small Business Owners

Posted on May 27, 2008 by David Gass 1 Comment

Small business owners need strategies to either keep their good personal credit score or improve it. The small business owner is at a disadvantage when it comes to personal credit. The score is based on “the average consumer” and a small business owner is in no way “average” when it comes to the use of credit.

The average consumer has one inquiry per year on their personal credit report. A small business owner could have as many as fifty just from running their business day to day.

Four tips to improve and keep a good personal credit score for a small business owner:

#1 – Don’t close old accounts. Personal credit scores are based on several factors, one of which is the length of credit history. The older your credit lines / credit cards are the better your score will be. So don’t close the old account you don’t use anymore. Keep it open and you will protect the age of your credit profile and keep your credit score from falling.

#2 – Negotiate the personal guarantee when leasing. Whether you are leasing equipment, a vehicle or real estate, keep in mind that everything is negotiable. The personal guarantee requests that almost every leasing company will have is negotiable. Of course, if you are requesting a $500,000 lease of equipment with no money down, no annual revenue and no personal guarantee, you will likely be turned down. So keep it reasonable. You may need to put more money down, look for lower amount of equipment or find a different piece of real estate in order to avoid the personal guarantee. Be willing to walk away from a deal and you will be more likely to get the kind of deal you want.

# 3 – Ask when filling out an application whether your personal credit information is required. You may be surprised. There are companies that will start by asking for a lot of personal information only because it’s on the application, but don’t require it to get an approval. If people are willing to provide all the information why not ask, right? I have found that just by asking “Can I provide my company’s EIN instead of my social security number” many times they say yes. Also, I have had some companies say, “oh you need our Corporate credit application, this is for sole proprietors “. Just ask!

#4 – Use business credit as often as possible. When you are starting and growing a small business you need to access as much credit and capital as possible to use for leveraging the growth of your business. Most small business owners don’t consider the use of their business credit profile and score, and instead use their personal credit for almost everything in their business. By establishing a separate business credit report from your personal report, the small business owner can obtain credit freely without the business credit weighing down their personal credit.