As a business owner, one of the most important questions you should ask yourself is “How will business credit affect my personal credit rating?” Many people think that they will not have any impact on their credit score because all of their personal credit is held by the parent company. The fact is, even when a person has no business activity on their credit reports, it is entirely possible to adversely affect their credit score. In fact, this can be one of the biggest reasons for the financial crisis we are facing right now.
With the way that many businesses are reporting their profits these days, it is entirely possible that the profit level is being greatly overstated in order to meet the requirements for reporting a profit. When a business reports a loss instead of a profit, their credit report has an adverse effect on their credit report. For example, a small loss such as what is typically associated with a software program that was not paid for can have a very negative effect on a business's credit report. If a business does not make their loan payments on time, the consequences for that business could be severe if they are not able to maintain their current financing arrangements.
One of the other concerns that you need to have is how your personal credit rating will be affected if you begin working with a new lending institution. The good news is that you have some options if you find that your current lender is not lending according to your needs. For example, you have the ability to apply for a cash advance from your business credit card. The positive news here is that if you use the money appropriately, you can significantly improve your credit score. The bottom line is that you need to act quickly when you find out that your lender is not making you available to borrow.
The other thing to consider is whether or not using your business credit card will negatively impact your personal credit score. The answer to this question will depend on a number of factors. If you have been diligent in paying your bills on time and have had no late payments made, chances are your credit report will show that you have been responsible with your finances. In fact, you may actually find that lenders will offer you a higher credit limit because of your good credit history. Additionally, if you have not been involved in any major credit card delinquencies, your credit score should be able to withstand higher interest rates on items such as vehicles and homes. It is important to realize that personal credit rating is separate and distinct from your business credit score and, therefore, there is no connection between the two.
In addition to this, the credit bureaus will use a numerical scale known as Fair Isaac Index (FICO) to determine your credit score. This is based on the information contained within your credit report and is used to give an overall credit rating to consumers. Lenders use the FICO score to determine if a business credit card is a good option for a borrower. However, your business credit card will not have any impact on your personal credit report, which means you will not see a change. If your FICO indicates that you are a high risk consumer then the card will certainly reflect this.
If you have experienced some late payments on your accounts in the past, however, this will have little to no effect on your business credit score. If you have been a customer to many major credit card providers such as MasterCard and Visa, you may notice that your interest rates and fees have increased since . . . . . . you began using their services. However, these companies only have control over the items on your credit report and, as previously mentioned, they will make all changes to it after you have paid your outstanding balance in full. Because of this, many consumers feel that it is unfair that they are penalized for other people's mistakes. Unfortunately, this is not true.
When you apply for a new credit card, your personal credit score will be automatically affected in a positive manner. You can expect that your credit score will rise following your application, provided that you maintain your high standards when it comes to paying your bills. This will also have an effect on your ability to acquire a mortgage or new vehicle loans. The chances of you being granted approval for larger personal credit accounts are much higher when your credit score is above around a 600 mark. You will find that applying for a business credit card will give you a lot more options.
As you can see, it is impossible for anyone to say whether a business credit card will affect your personal credit negatively or positively. What is important is that you understand what your credit score is and what your options are in terms of getting financing. There are many different lenders that offer personal credit cards and you should shop around for the best rates. If you work hard at rebuilding your credit score over a period of time, you will discover that all of the perks that major credit card providers like to tout will eventually come into play. As long as you remain responsible with your money, you will find that after your business credit card ends up helping you out.