DON’T LET BAD CREDIT HOLD YOU DOWN

Business Credit 101

The number of people who are released into the “real world” after high school without knowing the basics of the utilization of credit is alarming. The goal of my company is to help fix what is broken, rebuilding the credit score while educating the client on maintaining their newfound positive credit. For example, many banks will not authorize a business loan to most business owners but if one has a good enough credit score, one would be able to leverage that positive credit into credit cards and other lines of credit that could be used to jumpstart one's business. I will cover the basics of building and maintaining credit to at least help steer readers in the proper direction.

Credit Score 101

What is the makeup of a credit score? The first thing is first, payment history makes up 35% of the credit score. With that said, a late payment hurts the credit score more than any on the negative mark, so be sure to pay each bill on time and in full every month. Next, credit utilization makes up 30% of the credit score. That means the more use of your available credit, the more the score will drop. Essentially maxing out a credit card is almost the equivalent of missing or making a late payment. Third, the length of the credit history makes up 15% of the credit score. Each time new credit is added, it drops the average age of credit. For example, If a person has 1 credit card and it has been active for 8 years, adding a new card would bring it down to an average of 4 years and will temporarily bring the score down. My suggestion is to add most of the credit around the same time without worrying about the score then most of the credit on file will age together which will diminish the negative effect of adding a new card. Fourth, New accounts will temporarily drop the score because they are 10% of the credit score. Adding new accounts is not bad for the credit score but their initial effect could look counterproductive. It is not by coincidence that earners of an 850 credit score tend to have over 21 accounts but the accounts are managed properly. Lastly, the credit mix is worth 10% of the credit score.

Credit Profile 101

Credit mix is for example; a credit card, an auto loan, and a mortgage, that would be 3 types of accounts. Types of accounts and the average age of credit history are two areas that are hard to control while building credit but fortunately make up a small percentage. The fastest way to begin building is to take a look at one's credit profile, look for things that can be deleted, and add credit that matches the current score. Business owners can look for easy ways to establish business credit without a personal guarantee and use these unsecured lines of credit to build the business. Most have 12 months of 0% financing. Credit repair starts today and can be the key to financial freedom and generational wealth.