Some Contrasts Between Business & Personal Credit

A business is considered a separate legal entity in the eyes of the law and has all credentials for itself. It is independent of all the other factors possessed by the owner. The same goes for the maintenance of the credit position of both these separate parties. 

A business credit rating is different from the personal history of the owner for obvious reasons. If you own a business, you need not worry about your own credit reports for the maintenance of business finance. 

Let’s understand the implications of this. 

Why are they Separate From Each Other?

Other than partnership and sole proprietorship firms, the business has to be demonstrated as a separate legal entity. It’s because both of the mentioned forms of business have unlimited liability for the partner which comes into play for compiling a credit report of the firm. For companies and corporations, the owners enjoy limited partnership, which protects them from any financial losses of the business. 

Separate Credit History

Personal credit history is relatively for a more extended period as compared to the business. However, business credit history is more prominent with those higher credit amounts that it needs to produce and sell. You have to establish a clear distinction between the business and yourself. However, the profitability of a business is also a critical factor in deciding its creditworthiness.

Differences in Establishing Business and Personal Credit

Personal credit is simpler to maintain as compared to that of the business. Once a person knows how to rebuild credit with credit cards, and have the assistance of a credit repair agency, he can have sure shot results. However, repairing business credit has some steps as mentioned below. 

  • Have a Business Phone Number

A business phone number can be handled through a cell phone, landline, or any particular device. It separates the business from the owner. The business’ separate legal name must be highlighted with that number. It helps it establish a separate entity from that of the owner. 

  • Have a Business Bank Account

The bank account of the business must be opened in its separate legal name. Other than just existence, the account should be used for transactions frequently. 

A business credit card is a great way to rebuild credit fast. It should be linked to a bank account for day-to-day deals. 

  • Paying Bills on Time is Constant

Whether you’re looking for a building personal credit or business credit, payment of bills on time has to be constant. One cannot just delay bill payment and expect a good credit score. A lot of credit rating agencies look for your past habits and one cannot change history by disputing any information on the report. It has to be a dedicated practice right from the beginning. 

  • Incorporate the Business

Incorporating the business means separating the firm with the owner. While it is not possible in case of a sole proprietorship and partnership, there are few formalities to be fulfilled for companies and other business forms. Incorporating a business separates it from the credit report of the owner. 

  • Establish Trustworthiness with Suppliers, Vendors, Debtors, Creditors, etc. 

The business environment has many stakeholders that must be pleased with timely transactions. Every stakeholder, including creditors, vendors, suppliers, debtors, etc. must be satisfied with what the business has to offer in terms of finance. The external environment has a lot to say about the business’ practices. While we cannot control some factors, obliging them with timely payments and supplies can have a lot of influence on a positive walk towards credit rebuilding. 

As we can conclude from these points that establishing business credit is very different from establishing personal credit. However, there are some points in common, including paying bills on time. It doesn’t change for anyone. Find an agency that educates you on how to rebuild credit fast according to your specific situation.

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