For small business owners, the importance of having good personal credit can’t be overstated. Although you and your business have separate credit scores, maintaining strong personal credit can be essential to the financial health and growth of your business, especially if you’re looking for financing.

Whether you’re a small business owner or a sole proprietor, good personal credit could benefit your business in numerous ways, from allowing you to get the cell phone plan you need without putting down a deposit, to saving you money on interest and insurance. Your personal credit score can also be a key factor in securing funding from investors, a business loan, or getting credit from vendors.

Because small business owners often use personal credit to run their companies, your personal credit and your business credit are closely linked in the eyes of banks and other lenders. Many lenders look at the owner or owners’ personal credit history as a measure of their ability to meet financial obligations, and therefore will expect you to provide a personal financial statement.

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While personal credit is not typically the sole factor creditors rely on as a predictor of business behavior, it’s advisable to make every effort to maintain a strong personal credit score or improve your score if it is less than perfect.

Protect Your Personal Credit

It’s as important to monitor, evaluate, and protect your credit standing as it is to protect any other business asset. When it comes to maintaining or improving your personal credit, keep the following basics in mind:

  • Keep card balances low. Your credit utilization rate, which is the total balance divided by the card’s credit limit, is often a key factor used to calculate your credit score. Using personal credit cards for large business purchases can make it difficult to keep this rate in check, so consider limiting business spending to your business credit cards or financing big expenditures.
  • Pay bills in full. In addition to saving you money on interest, this can help keep your credit utilization rate low. Experts advise using no more than 30% of the available credit on a business credit card, even if you are paying the balance in full each month.
  • Don’t miss a payment. Your credit score tells lenders how likely you are to repay debts in a timely manner, so missed payments may lower your score significantly. Using online autopay for at least the minimum amount due can help you stay on track.

Monitor Your Credit Score

If you don’t know your credit score, you should. Business owners need to stay on top of their personal credit scores even more than the average consumer. Get in the habit of pulling your personal credit report and reviewing it to make sure it accurately represents your credit history.

There are three main personal credit reporting agencies: Equifax, Experian, and TransUnion. You can easily access your reports online at, and you are entitled to a free report every year from each agency. This report serves as a statement to lending institutions of your ability to honor your debts, and it reflects your total available credit, the length of time you’ve had a credit profile, and the number of inquiries on your credit report.

If there are errors on your report, dispute them and work to have them corrected. For example, any tax liens that you have paid should be properly marked. Under the Fair Credit Reporting Act, the credit reporting company and the information provider (the person, company, or organization that provides information about you to a credit reporting company) are responsible for correcting inaccurate or incomplete information in your report.

Manage Your Business Credit Card

Business credit cards can help you manage cash flow as well as build credit for your company. According to the U.S. Small Business Administration, 65% of small companies use credit cards and about half of these cards have been established in the company’s name.

Using a business credit card solely for company purchases and other expenses helps you maintain more accurate records, making it easier to budget, plan, and spot tax deductions. It will also reduce the risk of co-mingling your personal and business expenses, which can save time and help avoid issues at tax time.

While credit cards offer tremendous convenience and flexibility for small-business owners, this may come at a cost if you fail to meet your financial obligations. It’s critical to have a strategy for how you will manage your credit, including being aware of any penalties for not paying the bill in full each month or making a late payment. Ignoring the consequences of not making payments on time may be putting your credit score in jeopardy.

When used wisely, business credit cards provide flexibility for small business owners with short-term financial needs and for those who are trying to establish good credit. For situations when a credit card is not the ideal financing solution for your small business, contact Summit Financial Resources to find out how we can help you access the working capital you need.

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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.