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How to Keep Your Personal and Business Credit Separate

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Many small business owners have an understanding of personal credit. However, a few of them know how business credit works or if it exists. This gap of credit knowledge is averting many business owners from obtaining the funds they need to prosper. Such business owners turn for help from their family, friends, and personal loans to finance their business until they see it flourish. 5 Powerful Ways to Get Out of Debt in 2021

This route is taken mostly by those who are deeply passionate about their business idea and are ready to flourish. Importantly, it is best to work with companies that help build business credit without personal credit as you aim to separate the two. Below are ways in which you can keep your personal and business credit separate.

Create a business credit chronology

Business Credit

Open a business credit card and always ensure that you make the payments on time. When you keep on doing this, onto the credit file of your business, a good liquidation chronology gets registered by the business credit bureaus. When applying for a business card, it is good to be sure that the card provider gets to report to your business credit bureaus and does not report to personal credit.

Advice is given to big and small growing business owners not to make the mistake of depending on their personal credit cards to finance operations for your business. Depending on personal credit for payments can easily damage the personal credit. As a business owner, you do not only stay comfortable with yourself getting a business card but strive to also open credit lines with your suppliers and vendors. Having a tradeline will give you more time to be able to pay for your services and suppliers. 

Begin your business as a separate legal entity

Business Plan

Opening your business as a separate legal entity will highly refer you to being a sole proprietor. Before starting the separate legal entity, determine the type of legal entity that fits your business and financial condition. You might also want to seek advice from other sites that can take good care of your legwork, such as Legal Zoom.

In this way, it is much easier since you will have to complete an online questionnaire for a small payment fee. The sites will then fill out your documents and then file them with your state. In a short time, you might receive your official formation documents. This is important as it will not interfere with your personal credit.

Observe your business credit regularly

Staying on top is the next step after establishing healthy business credit. In some states, the credit score of a small business administration may lessen over a short period, for instance, three months. There is the reason why your creditors and lenders always reassess the creditworthiness of your company frequently. In case your credit reduces, the terms and conditions can stop or be adjusted.

Establishing a strong business credit profile separate from personal credit is an easier way of leveling the playing field of your business to avoid the feeling of stacking all odds against yourself as a small business owner. For this reason, you will be able to access more finances from more reliable sources and at a better rate.

Business credit payoff is huge. Hence, it is something that you have to always stay on top of if you wish to grow your business. also, it helps you be more aware of the status of your business and its credit score for future use.

Build a business checking account

Business Checking Account

helps your business financials to be in good order and permits you to get a clear picture of where your money is going. It takes a short time for one to set up an account at your local bank. The business account helps you with all your business-related expenses.

In case you want to pay yourself, do not deposit in your business account instead, deposit in the personal checking account. With this, business lenders will see your bank statements only and get a clear picture of how you are faring and also helps you to access more credit scores that have better payment terms.

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