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Within the past decade, there has been a huge uprising in the number of entrepreneurs going into business for themselves. What started as survival during the Great Recession when jobs were hard to find has become a trend. Why make money for someone else when your talents can bring in the entire package and not just a less-than-living wage? However, what you may not know if you are contemplating going into business is that your personal credit history and score can affect your business in ways you can only begin to imagine.

Your Personal Credit Score Can Impact Qualifying for a Business Loan

What you may not be aware of is that certain entities have what is called “permissible purpose” for running your credit report. According to the Fair Credit Reporting Act (FCRA), lenders have a permissible reason for wanting to look at your credit score and, of course, your credit history. If you need funding for your business and your credit score is not over 600 at a bare minimum, you might want to get the help of a reputable credit repair company before applying for a loan. Your personal credit can, and usually does, affect the availability of commercial loans.

Your Personal Credit Can Affect Premiums on Mandatory Business Insurance Coverage

Also covered as permissible purpose under the FCRA is the right of insurance underwriters to run your personal credit report. Since insurance premiums are based on the amount of risk an insurance underwriter is being asked to carry, your history of timely payments is of extreme importance. Not only will they be assured of timely payment of premiums, but your credit report speaks of your character, in general. Those business insurance premiums on mandatory coverage such as liability can be sky-high if you have less than exemplary credit.

Landlords Have the Right to Run Your Credit History

Unless your new business is a home-based business, you will most likely need to rent or buy premises from which to operate. The same rules hold true for mortgage loans as for business loans, as they are one and the same in this case. However, what if you need to rent office space or a commercial building for your new business? Again, under provisions in the FCRA, landlords have permissible purpose for running your credit. They want to know that you have a good history of paying timely and that they will not be left with thousands in back rent and legal fees incurred during evictions.

Optimize Your Personal Credit, Then Build Business Credit

Many people may not realize that once you become an entrepreneur, you have two credit scores to worry about; your personal and your business. Credit repair experts at Lexington Law have an informative article about the subject on this blog post.

“By now, you probably know about the importance of good credit in qualifying for low interest rates, getting a loan, and the various other impacts a good FICO score can have on your finances,” Lexington Law states. “But unless you’re already a business owner, you may not know that there is a credit score associated with your business too. Much like personal credit, business credit is an important metric lenders use to assess your aptitude as a borrower. However, there are significant differences between the two, and aspiring entrepreneurs need to be aware of the importance of business credit to help protect their professional and personal finances.”

If you are thinking to start fresh this new year with a new business, let 2018 mark the year that sees you getting your finances under control. Your personal credit score will most definitely impact your business in one way or another, so get that straightened out first and then put your business plans into motion. Until you have brought your score up to a reasonable level, no lender will touch your business loan application and insurance underwriters will raise premiums accordingly due to higher levels of risk.

Get a fresh start this new year by fixing your credit. Let this be the year you can finally say, “Est. 2018” on a business that will carry you forward to a lucrative, debt-free future.

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