Myth #1: Business Credit is Just Like Personal Credit This sounds like it ought to be true, but it just isn’t. Sure, the credit systems are similar. However, there are some very major differences that can seriously affect your business. For starters, the consumer credit system has, both in court and in congressional testimony, been demonstrated to be fairly anti-consumer. The system works against consumers in many cases, is prone to errors, and tends to resist the correction of any errors by consumers or their advocates. (In one example, even after a credit bureau was sued and lost in court, they continued to refuse for months to remove the incorrect information from the person’s credit reports.) The business credit system is quite different. It is not anti-business (or anti-consumer), it is less prone to errors, and when there are legitimate errors, they are generally easier to get corrected.
Myth #2: It Doesn’t Hurt To Use Personal Credit In Place of Business Credit This is a problematic way of thinking that can lead to big problems down the road. Using personal credit for business purposes puts your personal credit at risk for the sake of your business. By using personal credit for business, you limit the resources available to you personally and to your business, and the end result could be disastrous. Imagine when your business credit needs exceed your personal credit capacity–and when YOU need to use your personal credit and can’t because it’s been tied up by your business. No matter how you spin it, in the end using your personal credit for business is a bad idea.
Myth #3: Business Credit and Personal Credit Are In No Way Related While using your personal credit for business use is a bad idea, we can’t exactly separate business credit and personal credit completely. In many cases, especially when starting out with business credit, an owner of the company will be required to provide a “personal guarantee” for the business credit loan or line of credit. When providing a personal guarantee, the company extending credit will not only check your business credit, but will check your personal credit history. While the business account won’t show up on your personal credit report, the personal guarantee could eventually affect your personal credit in the event that the business fails to meet its obligations. Obviously, you should aim to avoid that scenario (and certainly can) by careful planning and smart use of business credit.
About the Author is currently in charge of compliance for our Business Funding Department within CrediHub Business Credit & Personal Credit Advisors.
At CreditHub Business Credit & Personal Credit Advisors he specializes in helping business owners establish excellent business credit scores and then leverage those scores to access cash and credit for their businesses.
Benjie Nunn is also the mastermind behind the release of the exclusive Business Funding Suite. The Business Credit and Funding Suite is the leading business cash and credit access system in the world today.
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