Debt Tips

If you are thinking about starting your own business, banks will look at your personal credit history if you have no business credit history. Thus, credit scores are more important than ever. While banks previously determined whether to lend to a business or not by looking at your credit, the business’s potential, any collateral you may offer, and your personal career history, this process has become extremely condensed in order to process more applications and level out the bank’s risk, so without excellent credit, you might find yourself denied a business loan.

Start by getting a tax identification number for your business, which helps separate your business credit history and your personal credit history – an important step in building your business credit and helping to launch your business. If you have bad credit, separating your business from your personal credit is crucial. You can do this by applying for a tax identification number for your business, but also by securing a business office address and phone, as well as a business bank account.

Larger and better-known financial institutions often automate their credit application processes now, and having a less than average personal credit score and no business credit history will hurt your chances of obtaining a loan. Try smaller, hometown banks, which are more likely to view you personal credit score while factoring in the potential of the business. Some lenders focus on high-risk loans for entrepreneurs. These loans often start with high interest rates, with the understanding that increased business cash flow can lower the rate. Depending on the amount of your start-up costs, you can also consider opening up a business credit line to help with initial expenses.

Another option in obtaining money is opening up a home equity loan. This may be a risky option, depending on the viability of your business. Home equity loans are loans taken out against your home. These loans can give you the start-up cash necessary to fund your business at relatively low interest rates, but depending on the strength of your business, you could lose your house if your business fails.

Once you have a tax identification number for your business, you can begin building your business’s credit history and score. You can do this by paying any business bills on time, especially your business credit cards. The national credit reporting agencies have also developed a credit report for businesses, and this will allow you to better track your business’s credit. By maintaining good personal credit, you can start off with good credit in the business world as well.

When you get married, one of the things that is probably low on your priority list is understanding how your finances will work as a couple. If you both have good credit, than this isn’t really a problem. However, if one of you has less than perfect credit, it is an important situation to discuss. Protect yourself or your new spouse financially to ensure a happy future for your family.

First and foremost, if you or your new spouse has bad credit, take precautions to make sure that one person’s bad credit does not create unnecessary problems for the other. This is most easily done by keeping your finances separate. You may also want to look into signing a prenuptial agreement. Although this is probably the last thing you want to think about as you plan your wedding, a prenuptial agreement is the best solution, especially when dealing with high amounts of debt or high incomes. It acts as security for both parties in the case of divorce. However, even if you deem a prenuptial agreement unnecessary, you should both talk about a personal verbal agreement to prevent arguments in the future. Protect your credit or your spouse’s credit by knowing where you stand right from the beginning

Opening a bank account together can be a great thing or a disaster. In the perfect scenario, both you and your spouse will contribute and withdrawal equal amounts. However, rarely is this the case. Instead, it is better to keep separate accounts or to contribute in relation to your overall income. (For example, if the wife stays home with the children and works only part-time, she may contribute less to the account than her husband who works full-time.) If one spouse tends to spend a lot of money and accidentally overdraws on the account, it could financially hurt the other as well.

The same is true for loans that you take out together-if one forgets to pay the bill, it will negatively affect the other. Instead of having one person be in charge of the bills every month, it is much better to set time aside to review them together each month. This way, you can both be sure they are getting paid. If one spouse has bad credit, he or she can use the other’s good credit in the same way a co-signer helps someone gain credit. However, remember to always be financially responsible so that you do not ruin your spouse’s credit or he or she does not ruin yours. This could lead to strains in the marriage.

If you are unsure how credit works after marriage or how you can work together to maintain or build good credit as a couple, seek help. Counselors and other professionals can speak with you about credit and the importance of establishing it together to provide a good financial footing for you future and a future family.