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Top 10 Business Credit Building Mistakes

August 17, 2009 By Marco Carbajo

Building Business Credit Mistakes

Business Credit Building

 

While many small business owners realize the benefits of starting business credit there are many mistakes that are made in the business credit building process. I felt that compiling a list of the most common mistakes I’ve seen throughout the industry can serve as a helpful guide to you. Here they are…

Choosing the wrong entity structure

Selecting the right entity structure for your business is the most important step you can make. Not just from a business credit standpoint but also from a tax and asset protection standpoint as well.  In addition there are state filing fees, franchise fees, licenses, resident agent service and a host of other important factors to consider.

Selecting the wrong SIC code 

There are certain codes that the business credit bureaus and lenders tend to stay away from. These industries include real estate investing, car sales, adult entertainment, travel, lending, restaurants, and dry cleaners. When you classify your business be sure to stay away from these classifications.

Selecting the wrong NAICS code

If you plan on investing in real estate then you will want to make sure that the company you build credit on is not “real estate investing”. Most banks will automatically turn you down because this is a high risk category. You still will be able to invest in real estate but you may have to set up a business that does business development, business consulting, marketing & advertising, training and development, etc. and then operate your real estate investments from a separate division or company that does something else.

Using a home or cell phone number as a business phone number

There’s nothing wrong with using these phone numbers but when it comes to business credit building it does matter. Your number has to be listed in the 411 national directories and cell phones and VOIP as well as call forwarding numbers do not work.

Having inconsistent information on business documents

When you start business credit you must pay close attention to details. The information used to open your credit file must match the information you use on applications, documents, and filings.

Applying for credit with the wrong vendors

There are 500,000 vendors in the U.S. that extend credit to businesses but less than 6,000 report to the business credit bureaus. Too many make the mistake of believing that simply doing business with a vendor will result in establishing business credit. Not true!

Applying for credit with vendors that report slow

There are vendors who do report your payment history but only on a quarterly or even yearly basis. Time is of the essence so you have to make sure the vendor you apply with also reports to the business credit bureaus on a monthly basis!

Applying for personal credit cards disguised as business credit cards

Pay special attention to what a credit card application requires and what the terms and conditions are.  A credit card that reports only to your personal credit is not a true business credit card

Applying for business credit cards that do not report to the business credit bureaus

There are over 500 business credit cards available in the marketplace but less than 70 report your payment history to the business credit bureaus.

Not establishing an effective bank rating

A minimum of a low 5 bank rating is a must if you plan to apply for a line of credit or loan. You can achieve a low 5 rating with a $10k balance in your account.

To access a complete step by step business credit building system with insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

To Your Success!

 Marco Carbajo

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a corporate credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Filed Under: Business Credit Tagged With: build business credit, building business credit, business credit, business credit builder, business credit building, how to build business credit, how to business credit, how to business credit building, start business credit

Top 4 Reasons Not to Use Personal Credit for Business

August 13, 2009 By Marco Carbajo

Business Credit Card picStatistics show that over 65% off all small businesses use credit cards on a regular basis; but the problem is less than half of those credit cards are actually in the business name. The others continue to use the owner’s personal credit cards for business transactions.

Using your personal credit, also known as you’re “Consumer Credit Profile,” instead of establishing Business Credit is a bad idea on many fronts.

 

Here are my ‘Top 4 Reasons Why You Should Not Use Personal Credit for Business.’

 

Reason 1

It impacts your personal debt to credit limit ratios, credit scores, and personal finance capacity for you and your family.

 

This reason alone has caused severe personal credit damage and liability to small business owners across the country who have lost their businesses due to the recession and have used personal credit and personal guarantees for all their business financing. Just ask Kirk Brown, owner of Buck’s Shoes in Fremont, who knows firsthand what using personal credit for business can do.

 

When you properly separate your personal credit from business credit the debt you accumulate for your business should only report to your business credit file not your personal credit file. More importantly you protect you and your family from personal liability when you get approved solely on your businesses’ credit file.

 
Reason 2

When you use your personal credit for the benefit or operation of the company it can lead to an “alter-ego” decision by regulatory or a financial organization, and a piercing of the corporate veil.

 

This would directly endanger the owner’s personal assets and make the owner or owners directly liable for the penalties or repayment of any debts incurred by the business or corporation.

 

It’s always a good idea to build business credit rather than abandon it through the co-mingling of funds–and this includes the “co-mingling” of credit profiles.

 

Many entrepreneurs believe that a corporation protects them because corporations are viewed as separate legal entities but you can jeopardize that protection when you use personal credit for the benefit or operation of your corporation!

 

Reason 3

Another disadvantage of using your personal credit in place of proper business credit is the fact that the use of personal credit for the operation of a company can make your company appear improperly funded or operated, or may incorrectly establish that your business credit is unstable, unreliable, or overextended.

 

Reason 4

Last but not least what might be perfectly normal and acceptable for a business credit profile, such as submitting multiple applications for business credit, can have a serious negative impact on personal credit because of what’s called excessive inquiries.

 

Solution:

Start building business credit for your corporation separate from your personal credit and improve your company’s image, protect you and your family’s assets, credit capacity, and personal liability.

 

Remember – To be prepared is half the victory. ~ Miguel De Cervantes

 

To Your Success!

 Marco Carbajo

About the Author

 sp_image-435950341-1242740704.pjpeg

Marco Carbajo is a business credit specialist, author, speaker, and founder of the National Entrepreneur Club.  Click here to visit his blog and signup free to get strategies, resources, and response-boosting tips with blog updates, news, and more! To start building business credit join his business credit community today and Click Here.

Filed Under: Business Credit Tagged With: build business credit, build corporate credit, building corporate credit, business credit, business credit card, business credit help, business credit strategy, business finance, business finance articles, businesscreditnopersonalguarantee, businesscreditvspersonalcredit, corporate banks, corporate credit, corporate credit program, corporate visa, establish corporate credit, financecorporate, general business credit, get corporate credit, home finance business, homefinancebusiness, how to business credit, instant business credit, obtain business credit, personalcredit, start business credit

FICO Vs. Credit Bureaus – Let the Battle Begin

August 1, 2009 By Marco Carbajo

Boxing pic

FICO

It’s not a surprise that Fair Isaac, the creator of the good ole FICO® score got the go ahead from the court to pursue it’s lawsuit against the credit bureaus for trademark infringement. If credit score terms like beacon, empirica, and FICO® are not confusing enough consumers have to also figure out what role Vantage score (Created by America’s three major credit reporting companies) plays in the overall landscape when it comes finance.

The majority of business credit lenders acrosss the country continue to use FICO® as the their overall risk assessment tool for credit decisions but many of also adopted their own internal scoring system to compliment FICO®. In addition FICO® recently launced FICO® 08 to the mix leaving consumers in the dark as usual.

From debt to credit limit ratios, date of last activity, open accounts, closed account, new credit, old credit, payment history, credit profiling, mathematical algorithms, and on and on I’m starting to wonder if the credit system will soon be just as complex as our tax system.

So how does this lawsuit affect you?

In a nutshell FICO® is asserting that Transunion and Experian are misleading consumers with Vantage score.  (Equifax has already settled out of court with FICO®) It will be very interesting to see the outcome of this court battle. In my opinion the easier the credit scoring system can become the better it is for you and I.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

About the Author

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in the SBA Community, American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

Filed Under: Consumer Credit Tagged With: Consumer Credit, consumer credit repair, credit, credit agency, Credit Bureaus, credit own, credit repair com, credit reporting, credit score, credit scores, FICO, vantage score

Discover What American Express Never Tells About Credit Reporting

July 28, 2009 By Marco Carbajo

Credit OwnThe American Express card has spent years and years branding itself as the card you can’t leave home without. While the AMEX card has been one of the consumer’s preferred credit cards to own not much has been discussed when it comes to the way it reports the payment history of it’s customers.

While the majority of the media is focusing on credit lines being reduced, bank failures, and so on I want to address something that knowone seems to know about or pay attention to. Back in 2007  only after numerous consumer complaints nationally Capital One finally started reporting the true credit limits of it’s customers after years of only reporting the maximum balance used on consumer’s credit cards.

These credit limits showing on your personal credit profile have an important impact on your credit score because it reflects your true debt to credit limit ratios.

Unfortunately, some creditors like American Express have not adopted this practice and as a result millions of consumers are left out of the dark when it comes to ensuring their own true credit limits are being accurately reported on their credit reports to this day. This of course impacts the credit score and impacts what type of interest rate and/or loans a consumer qualifies for.

American Express and HELOC

American Express and HELOCS (Home Equity Lines of Credit) are known for not reporting the accurate credit limits of an account. For example, the American Express green card does not have an actual credit limit so the limit reported on the credit report of the consumer is actually the maximum amount that you have ever spent on that card. So if all you have ever charged on your AMEX was $3,000, and you paid it in full when the statement came and then you spend another $3k the following month, the $3,000 limit reported would show that you are using your card at 100% of your credit limit.

So what’s the solution?

Until AMEX comes to their senses and starts reporting the true credit limit of it’s customers you have to meet them at the court and play the game.

You basically have the power to set your own credit limit with AMEX on your credit reports. The question is what’s the percentage you want to shoot for on your debt to credit limit ratio with AMEX? No more than 30%! So, if you know that you regularly charge let’s say $3,000 per month on your AMEX then you want to make sure that the true credit limit reporting for your AMEX account on your credit reports is $10,000 or more. Why? Because if your limit reporting is $10,000 for AMEX and your charging $3k monthly then you are right at 30%, therefore your score will boost tremendously!

How do you set your own credit limit?

To increase and leverage that AMEX credit limit higher on your credit report, you should use your AMEX card and spend over $10,000 such as travelers checks or something like a TV then pay it off when the statement comes. Be sure to only set your limit if you know you can pay the balance in full when your statement comes in! The last thing you should do is go into debt simply for the purpose of raising your true credit limits with AMEX.

So once your statement comes in pay it in full. Next, go back to spending $3,000 again like normal. Your AMEX credit reporting limit would then increase to $10,000 as your limit and your regular spending habit of $3,000 would be below 30%.

You will need to reset your limit again in about 7-8 months so keep that in mind. This insider secret is priceless and this strategy alone can build credit fast and boost your credit scores 25 or more points!

Another option to offset your debt to credit limit ratios and boost your scores is by adding new credit lines with large limits and no balances.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

About the Author

sp_image-435950341-1242740704.pjpeg

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in the SBA Community, American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

Filed Under: Consumer Credit Tagged With: add tradeline, american express, AMEX, build credit, build credit fast, business credit blog, consumer credit repair, credit, credit for small business, credit own, credit reporting, marco carbajo, own credit, trade line, true credit limit

Business Structures to Avoid for Building Business Credit

July 21, 2009 By Marco Carbajo

Business EntityI get asked this question quite often and thought I would clear the air on what business entity selection is best for building business credit.  This step by far is the most important because it’s the foundation of your business credit.  Not to mention all the other important areas that entity selection affects such as taxes, liability, asset protection and so on.

 

As a business owner, you have four real choices when it comes to business structures for building business credit, and two bad choices:

 

    * C Corporation

    * S Corporation

    * Limited Liability Company

    * Limited Partnership

    * Sole Proprietorship

    * General Partnership

 

You can learn more about your four good choices by listening to my FREE Business Corporations Seminar.

 

CLICK HERE to listen

 

To learn why Sole Proprietorships and General Partnerships are so dangerous to you and your family, read on.

 

A Sole Proprietorship is bad…

 

Have you heard the saying “You get what you pay for?” Well, you normally don’t pay anything to start either a Sole Proprietorship or a General Partnership. Of course you don’t get anything, either. Unless you count the following as valuable business assets:

 

    * Lots of personal liability

    * No protection from your business creditors

    * An increased risk of being audited

    * Problems with valuation for a subsequent sale of the business

 

The reason for this lack of protection is because neither of these structures is considered a separate legal structure. Instead, they are considered personal extensions of you, if you are operating as a Sole Proprietorship, or you and your partners, if you’re operating as a General Partnership.

 

And, because these business types are considered personal extensions of you, you don’t have any protection from them.

 

But a General Partnership is Downright Ugly!

 

It gets even worse if you are operating with a partner as a General Partnership. That’s because not only are you responsible for all debts and agreements you enter into in the name of your business, you’re also on the hook for all of your partner’s actions in the name of your business as well. This can be devastating if your partner is financially irresponsible, and, because either of you can bind the partnership; you have zero protection from your partner.

 

If You Don’t Choose a Good Entity, the Government Will Choose a Bad One for You!

 

If you’ve been doing business up to now without a business structure, both the IRS and your state government have defaulted your business into either a Sole Proprietorship or a General Partnership.

 

And that means you’re exposed.

 

Use a Proper Business Structure – If you want to build business credit and you want to protect yourself from personal liabilities.

 

CLICK HERE to join my business credit community today and discover what cash credit and financing opportunites you can obtain for your business entity. 

 

Remember – There is one thing stronger than all the armies in the world and that’s an idea whose time has come ~ Victor Hugo

 

 

To Your Success!

Marco Carbajo

About the Author

sp_image-435950341-1242740704.pjpegMarco Carbajo is a business credit specialist, author, speaker, and founder of the National Entrepreneur Club.  Click here to visit his blog and signup free to get strategies, resources, and credit building tips with blog updates, news, and more! To start building business credit join his business credit community today and Click Here.

Filed Under: Business Credit Tagged With: build business credit, building business credit, business credit, business credit blog, business credit blogger, business credit builder, business credit building, business credit coach, business credit help, business credit information, business credit service, getting business credit, how to build business credit, marco carbajo

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