Your Personal Credit
By building business credit, you avoid using your personal credit for business needs. You may not have any problems with your personal credit (and you may have to use it if your business is new), but it’s nice to keep them separate.
Business is risky, and you never know when things will go sour. If you can’t repay business loans, your personal credit will suffer. Building business credit allows you to insulate personal credit from the risks of your business.
Conversely, building business credit protects your business. Personal finance problems may arise, and they’ll show up on credit reports. This may make it difficult for your business to borrow and operate. You’ll need a functioning business to get back on solid ground or to sell the enterprise.
Act Like a Business
When building business credit, your business appears more legitimate. You might be a small-time operation, but everybody will see that you are the real deal if you have strong business credit files. Building business credit makes it easier to work with more demanding partners.
Different Factors
Personal credit is different from business credit. Credit scores depend on different inputs and different assumptions about risk. By building business credit, you develop a profile that’s relevant to business partners.
Personal Liability
You can do more than protect your personal credit score by building business credit. You can help protect personal assets. The greater the divide between business and personal activity, the better. Even if you’re incorporated, courts can disregard the corporate shield if you’re not careful.
How to Build Credit
The process of building business credit is similar to building personal credit: use credit and pay as agreed. Over time, your credit improves. Work with business credit reporting companies and partners that supply payment activity to them. You may also want to supply information to the credit reporting companies. Your credibility increases if there is plenty of information about your business available.
