5 Steps to Establishing Business Credit with Bad Personal Credit
Starting your own business requires that you have an adequate amount of start-up capital, and creditors need the assurance that you are worth the risk. However, when you have bad personal credit, this may be easier said than done. In fact, commercial lenders and banks approve less than 10 percent of loan requests from small businesses. Having bad personal credit can be a major block to entrepreneurs who are trying to make it in the world of small businesses. The good news is that just because you have bad personal credit does not mean that your company cannot succeed. In fact, it could help you be more careful with your spending when it comes to your new business. It is never too late to start building sound business credit while you also work to improve your personal credit. Here are five steps to improve your company credit when your personal credit is not so hot.
1. Make Sure Your Business Appears Legitimate
Legally separate your business from yourself to protect your personal assets. By forming a limited liability company or corporation, you can disentangle and separate your personal from business debts. It is also recommended that you get an EIN, which is the equivalent of a Social Security Number for your company, from the IRS, as well as a DUNS business credit profile from Dun & Bradstreet. Additionally, even if your business is online, you should establish a phone line and physical address for it, and have a professional business plan set and ready to go.
2. Take Control of Your Personal Credit
Having the right business model will not solve your credit problem, especially if you need a bigger loan. As a company owner with bad credit, you must do everything in your power to increase your personal credit history so that you can avoid high insurance and interest as much as possible. If this means consolidating a few debts and working to pay them off than so be it.
3. Utilize Trade Financing
When you are first working to establish your business credit with a not-so-hot personal credit history, one means of obtaining credit is to do so through business-to-business lending. This is also known as trade financing. Trade credit is typically a short-term financing option that has between a 15 to 30-day repayment term. The benefit of using trade financing is that it allows you to establish a good payment record with your suppliers while you keep your cash flow.
4. Obtain a Secured Business Credit Car or Fleet Card
Another type of credit that you can obtain to increase both your business credit and personal credit is a credit card. However, if your personal credit score is not up to par, it may be difficult for you to obtain a revolving line of credit. Instead, you can look into receiving a secured business card that requires a $500 security deposit. This will aid in increasing your credit score substantially so that you obtain more preferred lines of credit in the future. You may also look into getting a secured fleet card that only requires a small $300 deposit to use.
5. Take Advantage of Revenue Based Financing
You can also look into an alternative financing program such as one that is revenue-based. This type of program will allow business owners who even have as low as a 550 credit score range secure financing. Instead of credit scores, this kind of funding looks at business bank deposits. Keep in mind that to properly develop a creditworthy business, it is crucial that you implement the right mix of credit types such as revolving credit, short-term funding, leasing, etc.
Steps to Ensure Your Bad Credit does Not Cost You a Job
Do you have something in your financial past that you’d rather not have your boss see, such as bankruptcy, proclivity or bad credit from spending money that you don’t have? Unfortunately, that means that going after a promotion or seeking a new job can turn into a tricky task, especially as more and more employers seek to find out about their employees financial past. Many companies look at their job applicants’ credit score as part of their background check. Some may even look at credit reports when considering their employees for a promotion, which means you can’t just assume that you’re safe just because you already have a job. Luckily, there are some things you can do in order to prevent your bad credit from costing you a job.
Look At Your Credit Report Before an Employer Does
You shouldn’t be the last one to know what’s on your credit report. Instead, utilize a tool like credit.com in order to receive a free look at your credit score. Keep in mind that you can obtain one free credit report from each major credit bureau once a year. Check each one meticulously to ensure there are no errors. If you do find errors such as inaccurate or incorrect information then it’s imperative that you let the credit bureaus know right away and ask that they delete or correct it.
Attach an Explanation For Your Bad Credit
If your credit report contains negative marks, however they were caused by circumstances out of your control such as an illness, layoff, death, or at the fault of your ex-spouse to make a payment for a joint account then you can contact the credit bureaus and ask that they allow you to attach an explanation as to why you received the negative mark. Although it’s not easy to get rid of black marks on your credit score, it can help your potential employers see your bad credit score in a better light. This is especially the case if there is only one negative mark on your credit report.
Give Your Consent
Once you’ve made sure that everything is in order as far as developing a compelling explanation of your bad credit score and making sure there are no errors then it is up to you to give consent to companies in order for them to see your credit report. Although they are not permitted to see your exact credit score, giving your written permission will allow them to see everything else. This includes outstanding debt-related court judgments, delinquencies, high credit utilization rates, and bankruptcies. While you may be fearful about losing out on a job opportunity because of your credit report, unless you reside in one of the states that do not allow employees to see credit histories, you will have a better chance of losing a job if you refuse to allow companies to take a look at your credit report. By refusing them access you are pretty much admitting that there is a huge problem with your credit score. It’s much better to be prepared and consent than to out right refuse.
Take The Initiative
If you have some problems on your credit report then it’s recommended that you don’t just wait for your interviewer to ask you about them. Instead, be confident and take the initiative. Raise the issues before they even see them and explain the actions that you’ve taken in recent months or years in order to recover from your credit issues. Try to redirect the interview back to why you’d be a great candidate for the position. Keep in mind that you have a really good chance of being able to explain your negative credit information. Due to this, make sure that you prepare an explanation before going into your interview so that you can sound informed and confident on the issue.
5 Simple Self -Credit Repair Tips and Tricks
If you’re recovering from a foreclosure or bankruptcy or just don’t have that great of a credit score then the good news is that there are many things that you can do to increase your score so that you can get back on track financially. Although some of these strategies are intuitive, others many not come to mind so easily. Here are five of the best tips to increase your credit score all on your own.
Don’t Be Afraid to Dispute What’s On Your Credit Report
Many people want to avoid any sort of conflict at all costs, while others believe that there’s no point in arguing any of the negative notes that are placed on their credit reports, as they believe them to be final. However, this is far from the case. If there is an error on your credit report caused by an inaccurate accusation then you shouldn’t hesitate to dispute it. On top of this, you may even reap the benefits of disputing a claim that is accurate, but you have some leeway in arguing for its removal. Be aware that the older the records are, the better chance you have of arguing them off of your record due to the fact that many records go missing after a substantial period of time due to disorganization or simply older bookkeeping methods. There’s no harm in trying.
Build Up Your Credit History
It’s critical that you have as long of a credit history as possible, and so it’s best to avoid cancelling any of your old credit cards merely because you don’t use them anymore and they’re older. Instead, try to keep all of your credit card accounts open and use them every now and again so that they can help you increase your credit score. Just make sure that you pay them off right away so that it doesn’t go the other way and harm your credit score.
Don’t Use Too Much Of Your Available Credit At Once
Just because you have the credit doesn’t mean you have to use it up all at once, as this can be detrimental to your credit score. One of the main factors in determining your credit score is the ratio of your available credit to the amount of credit that you’re utilizing. In order to help your credit score, try to keep this ratio as low as possible so that credit bureaus don’t think that you have a tendency to go on spending sprees simply because you have the credit to do so.
Obtain Secured Credit If You Need It
If you are attempting to build up your credit score, however you’re current credit score doesn’t allow you to obtain a credit card then you may still be able to gain a secured credit card so that you can begin the process of fixing your credit score. They work just like a regular debit card or a prepaid calling card in that you deposit a sum of money onto the card and then spend it. In this way you are proving that you can be responsible with credit while still using your own money, and working to build up your credit so that you can then obtain a standard credit card.
Avoid Any More Major Credit Mistakes
Although this should be obvious, it’s something that you should always keep in mind so that you don’t fall into another credit rut or dig your financial hole even deeper when you’re attempting to climb out of it. One of the most typical mistakes that people make is not paying their credit card bill on time. You may want to set up an automatic payment system in order to ensure that you always at least make the minimum payment on your credit card bill so that you’re never late. Doing so will allow you to make larger payments at your discretion.
How to Keep Unpaid Medical Debt from Ruining Your Credit
If you have a medical bill that has ended up in collections then it has likely hurt your credit score a lot more than it actually should have. This was at least the conclusion that the Consumer Financial Protection Bureau came to after they studied over 5 million credit reports at the beginning of the year. This federal regulator kept track of how well the credit scores of people actually predicted how credit worthy they were after the medical bills appeared on their credit reports. They found that it didn’t in fact accurately predict how well people repay their bills. Those people that have medical collections usually paid all of their other obligations the same as those who have 10 points more on their credit score. Those that were able to pay their medical collections in full actually had scores that were 16 to 22 points higher than the average person.
Study’s Impact on Credit Score
The study didn’t exactly receive too much of a reaction from the various credit scoring companies. However, FICO, who is the creator of the leading credit score, stated that the very latest version of their formula will ignore minor collection accounts, and the next version that will be released will utilize a nuanced approach to considering a consumer’s collection data. This means that medical collections will impact nonmedical collections less. However this doesn’t mean that you should rely on this to protect your credit report and score from the impact of medical debt. The majority of lenders still use older FICO versions and will not be getting the upgrade any time soon. It’s not clear exactly how many will be willing to adopt the new version of the score right off the bat.
How To Keep Medical Bills From Ruining Your credit
It’s crucial that you take an active role in making sure that your medical bill does not completely sink your credit score. Luckily there are several things you can do in order to ensure that a medical bill ending up in collections won’t completely throw of your finances, and leave your credit score in ruins.
Be Aggressive When It Comes To Your Medical Bills
Don’t just assume that a hospital or doctor bill will simply get paid just because you’ve submitted it to your health insurer. Look at every medical bill that you’ve sent in as well as explanation of benefits that your health insurer provides you. If your medical bill still hasn’t been paid after a month or so then it’s time that you call up both your health insurer and your medical provider in order to find out the reason behind why it’s gone unpaid. Try to figure out a way that you can cut the red tape and get your medical bill paid faster in order to avoid collections all together. You should also follow up every month or even every week in order to ensure that your medical bill ends up getting paid. If you find yourself in an extreme standoff then you may want to consider paying the medical debt yourself and then seeking a reimbursement from your health insurer rather than allow your medical account to go into collections.
Ask For a Payment Plan
If you’re unable to pay your medical bill in full then try to contact your medical provider in order to seek a payment plan that you can reasonably do. Keep in mind that it is not a smart move to put your medical bill on your credit card, as this can accumulate a substantial amount interest, and if you’re unable to pay your credit card then you may end up with an even worse problem on your hands when your credit card bill ends up in collections. Instead, coming up with a payment plan usually allows you to avoid being charged any sort of interest. If your medical bill has already been given to a collections agency then ask that your medical provider take the account back in exchange for your making payments. If you find that your medical bills are overwhelming then ask that your medical provider give you financial assistance or some sort of discount on top of your payment plan.
How to Fix Your Credit After a Car Repossession
When you’re first driving away with a brand new car, everything may seem just peachy. However, this can all change when something comes up, such as a maintenance issue or a job loss that causes you to stop turning in your car payments. Before you know it you may find your car getting repossessed as a result of all those missed payments. Unfortunately, car repossessions will stay on your credit report for seven years after the original date of delinquency. This can negatively impact your credit for the length of the seven years, however the impact will lessen over time. Additionally, there are some steps you can take in order to repair your credit.
Look at a Copy of Your Credit Report
You can obtain a free copy of your credit report from the three major consumer credit reporting companies—Experian, Transunion and Equifax at annualcreditreport.com. Once you’ve obtained a copy, ensure that you carefully analyze it in order to verify that all of the information listed is correct when it comes to the repossession of your vehicle. If you find anything that is incorrect then you can dispute it by getting in contact with the credit bureaus. You can do this by sending them a letter or by completing a dispute form that can be found on the credit bureau’s website. If the information is found to be inaccurate it will be removed from your credit report.
Get Into Contact with the Financial Lender or Collection Agency
Get into contact with the original collection agency or financial lender about the repossession of your vehicle. Attempt to negotiate a payment plan or settlement offer with them for the balance that you owe. After the balance is paid down in full, the information will be passed down to the credit bureaus, which will update it in their system, which will raise your credit score.
Speak to a Certified Credit Counselor
You can get into contact with a Certified Credit Counselor, which you can locate at the CCCS website. Even if you had success in negotiating a settlement offer or payment plan with your creditor, it can be very beneficial to seek out the help of a professional. A credit counselor will be able to assist you in removing the negative marks caused by repossession on your credit history, as well as with managing your debts and creating a financial plan that will allow you to avoid any future problems with your finances.
Open a Secured Credit Card
You can work to rebuild your credit by opening a secured credit card through a credit union or bank in order to get positive information on your record. You can easily open a secure credit card by creating a savings account with a financial institution. Once you’ve deposited some money into your account, the funds will determine the amount that’s available as credit on your card.
Keep Up to Date on Payments
If you currently are using credit cards then ensure that you make all payments on time and in full if possible. This will ensure that your credit card steadily increases. Otherwise, making late payments on your existing credit cards will only make your credit score problem worse.
Negotiate with Your Auto Lender
Attempt to make a deal with your auto lender before you completely stop making payments on your car loan. Call the financing company and discuss your situation. Keep in mind that financial companies extend loans with the idea that they’ll get all of their money back plus interest. In most cases when a car is repossessed, the vehicles are sold in an auction for half of their contractual obligation. Because of this, financial institutions would rather skip this, and so they are likely willing to arrange a deal, and perhaps even extend your loan.
Talk to an Attorney
If the reason that you stopped making payments in the first place was due to the fact that you felt misled about your car’s condition then it’s a good idea to get into contact with an attorney. In many cases an attorney can help resolve the issue without your credit being affected by a situation that isn’t your fault.
Rebuild Your Credit
If your vehicle has been repossessed than it will take some time for you to fix your credit score. If you require another car in order to get to work while you’re working on rebuilding your credit then you should look into financing companies that give financing to people who have dealt with repossessions. Although the interest rates are usually substantially higher than a regular car loan due to the fact that it is a higher risk loan, if you are able to make steady payments on it then it can in fact raise your credit score.
The Cost of Having Bad Credit
It’s a common question many people have—how much will my bad credit score cost me? Although it can be difficult to give an exact answer, as it is different for everyone, there is no denying that having a bad credit score makes your life more expensive in a variety of areas. This is due to having to deal with higher interest rates, more expensive premiums, larger deposits, and the inability to receive some financial services.
No Two People Are Alike
No two people have the exact same financial situation or credit appetite and so there is no way to determine an exact number that your bad credit score will cost you. For instance, you can’t simply say that you credit score will cost you $400,000 over you credit life cycle. However, it is worthy to note that the heavier you lean on credit the larger the penalty you will have compared to someone who uses cash for most of their transactions.
If you have a poor VantageScore or FICO credit score then you simply won’t get as low of an interest rate on mortgage loans then if you were someone with a high credit score. In fact, if you have a low enough credit score you could be denied a mortgage loan altogether. The average interest rate for a fixed rate thirty-year mortgage of someone with a credit score higher than 750 is 3.8%. This means that if you took out a $200,000 loan you would be making a $935 payment each month. On the other hand if your credit score is lower than 650 the same loan would cost you around 4.9%. This means that your monthly payments for the exact same $200,000 loan would cost you $1,060 every month. That’s a $125 difference, which means that every year you will be paying $1,500 more just in interest, and if you live in the home for 5 years you will accrue $7,500 more in interest than if you had a better credit score.
The average interest rate on a credit card is about 15%. This is likely the most expensive debt that you will deal with, and 15% is only the average. The cost of having a bad credit score when it comes to credit cards is one of the most pronounced of all the other financial services. At a 15% interest rate, if you have a mere $5,000 in credit card debt and only making minimum payments will end up costing you over $12,000 and will take you around 27 years to repay all of it. Sadly, someone with a bad credit score is going to deal with a substantially higher interest rate on credit cards. In fact, it is not uncommon for people to pay almost 30% interest on a credit card. If this is the case then if you have $5,000 worth of debt and continue to make minimum payments, you will end up paying more than $132,000.
Having a bad credit score can negatively impact your job prospects. In fact, a study found that almost half of all U.S. employers look at potential employees’ credit score as a determinant for their worthiness of employment. Sadly, having a poor credit score can be enough to scare away many potential employers.
Your credit scores and reports are utilized by insurance agencies in order to determine whether or not you’re insurable and how much your premiums are going to cost. However, keep in mind that the score used by insurers are different than those that are used by lenders. That doesn’t mean that a bad credit score won’t affect your insurance rate. In fact, you can end up spending hundreds to thousands more on your premiums than if you had a better credit history.
It doesn’t end there. Although mortgages and credit cards are the most noticeably expensive financial services to use with a bad credit score there are a slew of others. This includes auto loans and utility companies as they use credit scores to determine your rates, deposit requirements and your premiums. Unfortunately, there is no getting around the fact that having a bad credit score makes life more expensive.
What to Do When Debt Collectors Keep Calling
It can be a complete nightmare if the debt collector’s keep calling round to demand payments. You may find yourself dreading hearing a knock at the door and maybe going out to avoid it. Obviously if you have the money available to pay them, it is not so bad. Paying off the debts will also means that they will not have to call round anymore. However, this may seem impossible. There are many ways that you can get the money together to pay off the debt though.
It may be that you have tried everything that you think is possible. You may have tried to get a pay rise, work more hours, get a better paid job or get a second job. However, one thing that many people do not realize is that may be able to get an advance on their salary. It is not possible in all jobs, but it can be worth asking for it, if you find that you cannot make ends meet. It would only be a temporary solution, but may be enough to get you out of trouble and buy you enough time to organize your finances.
Organize Your Finances
It is so important to prioritize your spending. Sort out your finances so that all of your bills are paid straight after you get paid. Then you will be able to see how much money you have left for the rest of the month. Bear in mind that you will have to pay fuel, food and other expenses from that. It can be wise to wait and see if you have any money left over at the end of the month, before treating yourself to any luxury items. If possible use that money to pay extra from your debts or save it to use in case you are short another month. It can be difficult to do this. It does take motivation and self-discipline. Some people do not have a head for figures and others just think it is too boring.
Ask for Help
If you cannot sort out your finances yourself, then do not be afraid to ask for help with it. You may not want to ask friends or family as you may not want them to know that you are in trouble. However, there are organizations for people who are struggling money wise that can help. Many of these are free of charge. Go to one of these and they will be able to take a look at your finances and help you to find a solution to get you out of debt.
It is not easy to get out of debt, but it is not easy being in debt either. Use the debt collector calling as a motivation for getting out of debt. By realizing how bad things can be you will hopefully want to improve your situation. There are ways that you can get help and you should be able to get things sorted out. It will take time and self-discipline and it will not be easy, but it is possible to do.
How Bad Credit Can Keep You from Getting a Job
Thousands of employers complete credit checks for new hires these days. While this is a huge drawback for those that are well-qualified and experienced enough to complete the work, it does prevent some from becoming employed. It may not seem fair in some respects, but it is an employer’s right to run a credit checks on potential new hires.
A tarnished credit history displays a general lack of responsibility. What this tells a potential employer is that you just want to earn money but don’t want to pay your bills. This is not always the case. Some employers look the other way when it comes to medical bills, but there are those that see it as a way of milking the medical system.
Potential employers will look for repossessions on homes and cars as well as unpaid utility bills from moving, unpaid subscriptions and any other collections or judgments against you. In some cases you may be able to explain the situation behind the bill going unpaid and the potential employer will understand. Some employers find no excuse acceptable for not paying a bill that you knowingly accrued.
Shows Lack of Maturity
It is common for young adults to skip out on paying a bill. The most common bills that go unpaid are cell phone bills. Utilities such as cable and internet are also common for young persons to ignore. Once a young person obtains employment, credit cards and credit accounts are often obtained. The thing that young adults forget is that they still have to pay for items purchased on credit.
Young adults aren’t the only ones that ignore bills from time-to-time. Older adults run into financial difficulties too and are unable to pay some of their bills on occasion. This does not mean that the bills were unpaid intentionally; it simply means that things got behind and an account or two had to be temporarily neglected.
Paying bills on-time or making payment arrangements on accounts that are listed on a credit report show responsibility and maturity. Perfect credit is not needed, a couple of small infractions is often alright, especially if they are a few years old. Responsibility and maturity go hand-in-hand, so it is best to try to spruce up your credit report before attempting to gain employment with some companies.
Potential employers often feel uneasy hiring someone that has poor credit. This is because in their eyes, it is foreseen that the person will not show up for work, will quit without notice or will need to have shifts covered on a regular basis. Situations like this cause problems for employers as covering shifts at the last minute is not always an easy thing to do.
Reliability is important to employers. They have to be able to count on each scheduled employee to be present for work every day, unless there is an illness or emergency. Unreliable employees rarely have an opportunity to advance in their careers and get stuck in one position for their duration of employment with the company.
Many people seeking employment find it unfair that credit reports are part of the hiring process. You can look online on the company’s website to see if a credit check is part of their hiring process. If it is, look at your credit report to see what small items you can pay to help boost your score a little bit. Upon paying the items, obtain proof of payment and submit that to the potential employer if your credit report is brought up in the interview process. It never hurts to show that items have been paid to show that you are mature, responsible and reliable.
How to Get Bad Credit Auto Financing
Cars are necessities, however they are one of the most expensive necessities that we can purchase. Most people purchase a car through auto financing. Auto financing allows you to pay a car over a course of years. Auto financing can be as short as one year, or it can be as long as five to seven years, depending on the lender.
If you have bad credit, you know how hard it can be to get financing for any product that you may need. Fortunately, there are some opportunities for those who have bad credit at the time being to get financing in order to secure a vehicle.
Stop by the Dealership
Many times, people with bad credit will shy away from going to a dealership to get a vehicle. Most people with bad credit will automatically assume that they are unable to get a vehicle from a dealership. This is often not the case. Some dealerships have many different avenues to get you financed for a car. Dealerships often have relationships with banks and lenders who can accept less than perfect credit. For dealerships, your income will make a big difference, as well as your time on the job. Sometimes just talking to the financing department can get you an approval.
Bad Credit Lenders
One sure fire way to be a good candidate for auto financing is through a bad credit lender. Finance places that specialize in offering loans to individuals with bad credit are more likely to be less concerned with a bad credit history. First, you want to find out the minimums standards for the auto financing company. This includes income, credit rating, and auto price. If you meet the standards, or if there are no minimum standards, you should apply for the loans.
Be aware of the interest rate of your loan. Many bad credit auto lenders will charge a larger interest rate than your standard loan. Make sure that your monthly payment can be easily afforded through your budget. Do not go over a monthly payment that you will be able to afford each month.
Get a Bad Credit Personal Loan
Bad credit personal loans can be taken out to purchase a car for cash. Sometimes, your bank, or especially your personal credit union may be willing to give you a lower level personal loan. You can take the money for the personal loan in order to pay cash for the car.
If you take out a personal loan, you may need collateral to back up the loan. If you have jewelry or anything that is worth cash, you can put this up as collateral so that your car will not be repossessed in the event that you miss payments on your loan.
Even with bad credit, you have a number of options for getting lending for an automobile. If you are in need of a car, try the three above methods to get the car of your dreams for a price that you are sure you can afford.
Why Bad Credit Doesn’t Really Matter for Auto Loans
A bad credit rating can stop you from being able to borrow money. However, there are certain types of loans, including some auto loans which are available to those with a bad credit rating. There are some features of auto loans that can make them more likely to be given and there are things you can do to increase your chance of getting one.
As auto loans tend to have a shorter term, than other loans such as mortgages, then lenders tend to be less strict with regards to whom they are prepared to lend money to. It may be possible to get a loan with a good interest as well, although those with a worse credit rating may find that their interest amount may be higher because they are a higher risk.
It is also in your advantage to have a lower term loan because you will pay it back more quickly and therefore it will cost you less overall. You may be tempted to go for something with lower payments over a longer term but if you can afford to make the higher payments then it will be cheaper.
If you can make a significant down payment on a car loan then you are more likely to be able to secure one. With a chunk of money paid off it shows the lender that you are capable of saving up some money. This makes you seem as less of a lending risk. It also means that there is more equity in the car which is attractive to the lender.
With a car loan, you have the car as equity. What that means is that if you cannot keep up the payments on the loan, then the car can be repossessed. This is not nice for the borrower of course, but it means the lender has some security. Hopefully this will not only mean there is a better chance of a loan being approved but will also help to keep the price down.
Sometimes an auto loan will have a lot of add-ons. They will try to sell you warranties, insurance, servicing and things like that. They can make a lot of money from these and they may be prepared to give you a loan if you sign up to these. Be careful though, you could end up paying a lot more money than you originally intended to.
Getting a Co-Signer
It is possible to have someone else sign your loan agreement with you. They will guarantee that if you cannot make the repayments then they will do it for you. They will need to have a good credit record and this will help you to be a better lending prospect.
Due to the security that a car loan has, it means that you could be offered a loan more easily than for other things. However, it is important to shop around. Remember that it is not just a car dealer that can give a loan for a car. Credit unions and banks will offer car loans and these can be cheaper, so it is worth doing some comparisons and applying to the cheaper ones first.