April 15, 2014
Question: Steve, I know you used to practice law, so I am hoping you can help me. I went to get a loan for my business, and my personal credit showed a lien against me for $30,000! I know I don’t owe anyone anything like that amount of money. So I didn’t get the loan AND I have bad credit. Do I need to hire a lawyer, or what?
(Part 1 of 2)
Answer: I was speaking at an event recently put on by Dun & Bradstreet Credibility Corporation called Access to Capital, where we shared ways for entrepreneurs to get the money they need for their businesses, and after it was over, I received the question above.
There is no doubt that having good credit is one of those things that you think about in life but may not really worry about in business – until you need it.
Having good credit, both personal and business-wise, means you do indeed have access to capital, and capital is what funds the dream. It is capital that allows you to start and grow that business. It is capital that assures you that your great ideas don’t remain inchoate. It is capital which allows you to physically manifest what it is you want to do in your business.
So how do you get the money and credit you need for your business? It is a four-step process:
Know your credit score, both personal and business: When it comes to getting business credit, many small business people start out co-mingling – that is, using their personal credit to fund the business. Either they use their own credit cards, or they take out a second on the house, or maybe they have to give a personal guarantee for a loan. Whatever the case, it is your personal credit that is allowing you to access capital. The better your credit, the better your odds.
And that then begs the question: How do you know what your credit score is? It is here that I have a cool new tool to share with you. I was recently given a tour of the new credit score tools from Credit.com by CEO Ian Cohen and Gerri Detweiler, Director of Consumer Education for the site. If you want to know what your credit score is and how to improve it, then this intuitive, easy to use site is for you.
As Ian and Gerri explained to me, people generally want to know a few things when it comes to credit:
1. How do I check my credit score?
2. What does it mean?
3. What do I do?
Not only does Credit.com make getting your personal credit score easy, it is free, and it comes with tools that allow you to understand how to improve your personal credit score. The site will show you your payment history, debt levels, the age of your credit, inquiries made, and so on. But maybe the best part is that the site also shows you how to better your score – what happens to your score when you pay more, or more on time, or consolidate your debts, or pay off a balance, and so on.
There are two other parts to knowing what is on your credit report. The first is, beyond understanding your score, you need to see what is actually on your personal credit report. The way you do that is to get a copy of your report and review it. By law, everyone is allowed one free copy of their three credit reports once a year (from Experian, Transunion, and Equifax). You can get yours at AnnualCreditReport.com.
The other credit score you must monitor is your business credit report. Now, you may not think you have a business credit report, but you probably do. Even if you have not set it up, most companies have a DUNS number, a proprietary designation from Dun and Bradstreet. Your DUNS report is the business equivalent of your personal credit report. You can check yours by going here.
Once you have a handle on where you stand vis-à-vis your credit, you will be in a far better position to get the credit you need for your business. That is what we discussed with entrepreneurs at the D&B Credibility event, and those steps are what I will be discussing next week.