Regardless of your personal credit score we can coach you on building business credit. True business credit is not reported on your personal credit report. True business credit doesn’t require a personal guarantee.
Sandi owns her own dental practice. To get started she used her personal credit to obtain much needed funds to open an office, buy equipment and other business needs. Sandi has 10 credit cards with high limits, so funding was not an issue. She used 85%-100% of her available credit on her cards and took out three internet personal loans.
Wondering what the problem is? After all, she has plenty of income from her business to repay her loans.
Here’s the problem….
- The more credit that she uses on her credit cards causes her score to decrease drastically. Using higher percentage of credit card limits causes credit score to plummet. Think of it as a see-saw…and that’s how it works. Max out card…score goes down. Pay 90% of the card balance and score goes up. We worked on her personal credit for several months, by shifting her personal credit card debt to credit cards obtained in her business credit, for her to be able to qualify for a home loan. Maxed out business credit cards will not affect your Paydex credit score.
- The credit card interest that she paid on personal credit cards is probably not tax deductible. The interest paid on personal loans were not tax deductible. That’s a lot of money left laying on the table.
- Sandi doesn’t qualify for the price of the home she wanted and couldn’t move to the neighborhood that Sandi wanted to raise her children in. Why? Because her payments for personal debts were factored into her debt to income ratio and thus lowered her buying power.
Business credit works differently.
- Applying for credit will not harm your business credit score.
- Maxing out business credit cards will not affect your business credit score.
- Interest paid on business credit cards are tax deductible.
- Interest paid on business loans are tax deductible.
- Other fees incurred on loans or credit cards are tax deductible.
- Credit card limits on business credit cards are usually 2 to 3 times more than applying for a personal credit card.