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You are here: Home / Business Credit / How to Balance Personal and Business Credit

How to Balance Personal and Business Credit

December 1, 2012 By Marco Carbajo

Personal and Business Credit

Operating a successful business requires a great deal of attention and effort, from cultivating your business reputation and managing day-to-day operations to keeping your company financepersonal and business credits organized.

One of the most important tasks owners focus on is maintaining a strong business credit rating due to its influence on business lending, partnerships, investors, and vendor relationships.

One of the most difficult aspects of managing business accounts is keeping personal and business credit lines separate, namely because it’s easy to blur the two.

You might use your personal credit card to make small business purchases, or sign a personal guarantee for a business credit card. In other instances, you might take out a personal loan to cover your company’s expansion or rely on your home equity.

Mixing these credit lines can have an adverse impact on your personal and business credit scores in some cases, so take steps to ensure they are kept separate.

Step 1: Avoid personal guarantees

Many business credit cards will request that you make a personal guarantee, but try to seek out products that don’t impose this stipulation first. If you must make a personal guarantee, try to back the account with cash rather than a personal asset that will impact your credit score if repossessed.

Step 2: Check your separate credit reports

To ensure your business and personal accounts are correctly listed on their respective reports, frequently check your separate credit reports. Your business accounts should not appear on personal reports and vice versa.

Step 3: Keep your personal finances in order

While you should avoid using personal credit to obtain business accounts, lenders may still scrutinize your personal credit when making decisions about your business. For this reason, avoid neglecting consumer credit obligations.

Your business and personal credit are equally important to your overall financial health. By keeping these accounts separate and healthy, you can help ensure that your finances are stable.

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Filed Under: Business Credit Tagged With: business credit, personal and business credit, personal credit

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