How to Get Business Credit with Bad Personal Credit

If you have a bad personal credit history it will be difficult for you to get loans and credit for your business. However, it is not impossible if you take the correct approach. Remember that it takes time to establish credit, whether you are building personal or business credit.

Difficulty:

Moderate

Instructions

1. Legally separate your business from your self. This is very important. If you do not do this, then your social security number will have to be used every time you apply for business credit. To separate your business from your personal finances you should apply for all required licenses, get a phone number listed in the business directory and most importantly, apply for a tax ID number for your business. This tax ID number will be used instead of your social security number.

2. Start off small. Getting trade credit is usually the easiest step for a business without any credit history. Apply for a line of credit, or a credit card at the stores that your business does business with. This credit should be issued under the business name and tax ID number.

3. Build business credit slowly. Pay off your trade credit in a timely manner. This will start to build a good credit rating for you business. When you have established a little credit history under the business name approach a local lender for a small business loan. Do not borrow much for the first loan.

4. Grow your business credit rating by paying the small loan off on time. Every time you borrow money and pay it back your business credit rating will grow.

5. Work on rebuilding your personal credit rating. Eventually your business might need to approach a larger bank looking for a larger loan. Most banks will require not only a business credit check but also a personal credit check. Typically the owner of the business must have a credit score of 640 or higher to secure a business loan.