3 Big Differences between Personal Credit Scores and Business Credit Scores

3 Big Differences between Personal Credit Scores and Business Credit Scores

There are many differences between personal and business credit scores. One fundamental difference between consumer and business scores is the time frame the scores gauge someone’s risk of default over. A business credit score is a mathematical model that is used to depict a business’s risk of going 90 days late on an account within the next 12 months. A consumer credit score is a mathematical model that is used to depict a consumer’s risk of going 90 days late on an account within the next 24 months. Another big difference between consumer and business credit scores is what the score actually represents. A consumer credit score reflects an individual’s likelihood of defaulting on an obligation.A business credit score reflects the business’s likelihood of defaulting on an obligation, not the business owner’s. The business credit score is based on how the business obligations are being paid, not how the business owners pays their personal obligations.Another major difference between business and consumer credit scores is the score range. Consumer FICO scores range from 350-850 with 850 being the best score you can obtain. Business credit scores typically range from 0-100 with 100 being the best score you can obtain. There are three of many major differences between consumer and business credit...
Business Credit Benefits

Business Credit Benefits

Imagine having the ability to access $50,000, $100,000, even $250,000 for your business. Now imagine doing this with NO personal credit check and NO personal guarantee.Your success in business will be determined based on your business credit profile and score. With a good business credit profile you will have near unlimited borrowing power. Without having a good business credit profile it will be a difficult path to success without having access to working capital and funding. This is why almost all Fortune 500 companies use their business credit to secure funding. It’s not that they need the money to operate. Successful companies use funding as leverage to grow their business. Business Credit is the best kept secret in business.Over 90% of all business owners know nothing about business credit or business credit scores.But when you do discover the power of what business credit can do for you and your business you will be floored at how easy it is to get money and grow your business.One of the many benefits of business credit is that you can obtain funding with no personal credit check.With a strong business credit profile lenders will lend you money based on your business credit, not your personal credit.This is excellent if you have personal credit issues as you can still qualify for funding. Even with exceptional personal credit, business credit gives you DOUBLE the borrowing power.You can get approved for much higher funding amounts using your business credit than you would if you used your personal credit to qualify.Another great benefit of business credit is there is no personal guarantee required for much of...
The 5 Cs of Business Credit

The 5 Cs of Business Credit

The 5 Cs of business credit are: 1. Character 2. Capital 3. Capacity 4. Collateral 5. Conditions Character is all about you. It’s about your personal history, your stability, and how reliable you are. This variable is more subjective than the others, and is one of several reasons it is beneficial to do business with a bank where you have built relationships with the people who work there. In determining your character, the lender may look at your education, your work history, your personal income, and personal credit history. Again, it’s important to remember that this is one area of business credit where relationships do matter! Capital is about how much you have invested in your business. Whether you are seeking a bank loan or a loan from a private investor, the lender will want to see that you are heavily invested in your own business. Generally speaking, the more of your personal money that you’ve invested in your business, the better it will look to a potential lender. (After all, if you’re not confident enough to invest in your business, why should they be?) Capacity is about your ability to repay a loan according to the terms. Things like cash flow, payment history, and the assets and resources of any person providing a personal guarantee will play a part in determining your capacity to pay back a loan.Collateral is something offered up as security for a loan. Anything from equipment to inventory to a home you own can be considered collateral. It may be easier to get approved for loans with collateral, and many loans will require it....
Denied Business Credit?

Denied Business Credit?

According to recent reports, as many as one third of applications for business loans are denied. If you find yourself as part of that group, there are some things you can do to help the situation. The first thing you need to do is try to determine where the problem is. Possible areas of concern may include: ● Your business profits. Does your business have a healthy profit margin?Improving your profits by reducing and trimming down the operational excess and unnecessary business spending can help improve profits and boost your chances of getting approved. ● Your business assets and liabilities. If your balance sheet is out of whack, most lenders will run the other way. If your business is already heavy on debt, then this will be an area of concern that you’ll want to address. ● Your payment histories and business credit profile. Obviously, how you are paying your existing obligations will play a role in your approval or denial for credit. If you’ve been denied business credit recently, check your Paydex and other payment performance data and make adjustments as necessary. ● Most payment experience data is only reported for 2 to 3 years (depending on the credit bureau), so if you’ve made a mistake or hit a bump or two in the road, don’t let it worry you. Just keep the positive payment history building, and make sure what is being reported to date is accurate. ● Your bank ratings. If your business bank account balances are habitually low, this can actually rule you out for certain types of business credit. Try to maintain $10,000 or...
5 Factors That Affect Your Business Credit

5 Factors That Affect Your Business Credit

What makes up your business credit score? What gives you the best chances of getting a loan? Here are a few factors that play into your business credit picture, and what you can do to make the most of them: 1.Payment History– Your payment history is an important part of your business credit profile, and is what your D&B Paydex score is based on. Many credit opportunities come with a minimum Paydex requirement. What you can do: always pay vendors EARLY. On time is “okay”, but paying early (as in before you receive the invoice) is best. 2. Credit Applications – Believe it or not, multiple applications for credit can be a red flag that will keep you from getting approved for a loan. Too many in a short period of time will make your company look desperate and be a sign to potential lenders that things are going downhill. What you can do: plan your use of credit accordingly, and keep applications to the minimum necessary to accomplish your goals. 3. Blanket UCC Filings – One thing that many people don’t realize is that they need to pay attention to the order in which they get certain types of loans, and what UCC filings the lenders will file. Some lenders may file a “blanket” UCC filing, which essentially says they have an interest in ALL of your assets. These blanket UCC filings will then take precedence over any subsequent ones, which drastically reduces your ability to get credit elsewhere. What you can do: plan your credit carefully, and negotiate UCC filings according to what your needs are. For...