Three Steps to Starting Your
New Business With a Clean Credit Score
For many people, starting their own business is a personal
dream. Before fulfilling your personal dream, it's necessary
to get your personal finances in order. At this early stage
you'll be using your own personal finances to start your business
and if you want to succeed you must approach your personal
finances with a professional eye.
Avoid funding start-up expenses via credit and running up
huge credit card debt. Instead you should apply for a business
loan, which has the benefit of being a one-time loan with
typically lower interest rates than a credit card. However,
in order to get good terms on your loan, you will have to
have your credit card debt in order first.
Without an established business credit history, lenders will
have to look to your personal credit to negotiate your terms.
You don't want personal credit problems starting your business
credit off on a bad foot.
Three Steps to Starting Your New Business With a Clean Credit
Score
A clean credit score will help you get the low interest rates
you need to start your business on solid financial ground.
Step One. Pay off your credit card debt.
Once you know where your credit weaknesses lie, zero in on
them to start improving your standing. Your goal will be to
completely eliminate all credit card debt. It may seem like
an insurmountable task, but in reality, paying it off as fast
as you can is actually easier and less expensive than paying
it off over a period of many years.
First, start paying double the monthly minimum on the balance
with the highest interest rate, while paying the minimum monthly
due on everything else. By paying down that highest-interest
balance, you will save yourself from potentially spending
thousands extra in interest - and you'll be done in half the
time. Once you have paid off that balance, move on to the
one with the next highest interest, and so on down the line.
Eventually you will enjoy the freedom of zero credit card
debt. In fact, if you find yourself having a hard time staying
away from credit card purchases – take them out of your
wallet and bury them in your closet until you have improved
your financial situation.
Step Two. Check your credit report.
Have you seen your credit report? You can get a copy of yours
by visiting http://www.freecreditreport.com. Look over it
carefully to make sure there are no mistakes that could have
negative effects on your credit and your interest rate.
If you find any mistakes, you may dispute them through the
credit-reporting agency. The creditor then has 30 days in
which to respond to your dispute. If they fail to respond
within 30 days, the disputed information is expunged. If it
is a particularly old debt, creditors may not even bother
to respond. Disputing credit report mistakes is definitely
worth a try since you have nothing to lose but bad credit.
Step Three. Pay bills on time.
Your credit is not based solely on your ability to pay off
your credit card debt. You must also demonstrate that you
are responsible when paying your bills: utility bills, car
payments, and rent for example. Try to pay all of these on
time and in full and it will reflect well on your credit report.
If you have trouble remembering to pay your bills on time,
try to keep them all in a highly visible place so you will
have a constant reminder to pay them.
Many utility bills may be paid online these days, so you can
simply check with your utility companies to set up automatic
payments. Not only do you maintain good credit by paying on
time, but you also avoid paying late fees, and saving money
is always a wise financial move!
Before you establish your own business, it is imperative that
you begin with a clean slate: no debt, healthy credit, and
responsible financial habits. When you have a good credit
score to begin with, your business will have a stronger start
and will be easier to run. Good finances mean success. Best
of luck with your new business venture!
©
2005-2006 DebtGuru.com®. This article may be freely distributed
as long as the signature file and active link are included.
Michael G. Peterson is the Vice President of American Credit
Foundation, an IRS 501 (c)(3) non-profit consumer credit counseling
organization that has assisted thousands of individuals and
families with their financial situations through seminars,
education, counseling services, and, debt management plans.
For more information, and free consumer resources visit www.debtguru.com
