Importance of Building Credit and Easy Ways to Build It!

You are now watching the Biz to Biz Podcast with Allen and Justin. Yo, what's up everybody? It's Justin live from B2B Vault, the Biz to Biz Podcast sponsored by Nationwide Payment Systems, hosted by this guy, the Steven Seagal of payment processing himself, Allen Kopelman. And in today's podcast, we'll be discussing the importance of building your credit, both personal and in business. Yeah, it's It's important, so take notes. What's up, bro?

Busy week. We're approaching that magic day, April 15th.

Oh, I thought you were about to say 4/20.

4/20, yeah, we're approaching 4/20. We'll have to do a 4/20 podcast.

What's the magic day?

I'm saying that we're approaching tax day.

Oh, I just yelled at my dad. I said, the IRS this morning, hardcore.

I was watching this.

I owe them so much money.

You wanna know what's crazy?

How do I pay taxes?

Yeah.

They take the taxes out of my payroll check.

Yeah.

And how do I owe taxes still?

Only if you didn't have enough deducted. No, no, no, no, no.

I have zero. They take out the most.

The max? I don't know, we have to call the payroll company and ask 'em about that.

Because this is the second year that I owe taxes and they're, how the fudge sickles? I cannot stand the Internal Revenue Service.

Well, you do have some, a little bit of other.

It does not make, no, no, no, no, no, no, no, okay. It doesn't make sense.

Okay, well, we'll call the payroll.

I wanna choke the living shit out of the IRS. Sorry, sorry, I'm sorry, sorry, sorry for my language.

I was watching an interesting clip this morning and I've seen this movie before. Atlas Shrugged. You ever heard of that? Whatever. It's a crazy movie about taxes and what ability does the government have to just keep taking our money from us and do whatever they want with it.

So I don't know. Yeah, this is an interesting podcast. Today's date is 4/11/2024, if you're paying attention. Yes. Timestamp.

Okay.

How are you doing otherwise?

No, doing good. Rocky's over here bugging me for treats and scratches. Yeah, but you know, you know, it's an interesting— it's an interesting subject about, you know, credit. And I think that this is something that should be taught in middle school, high school, and people should really understand about how credit works. How to build your credit, your personal credit, and then if you're going to go into business, how you deal with business credit.

I think it's stupid as shit.

What, credit? Yeah.

I mean, coming— so like, like there's just two different perspectives here, right? Like when you grow up in poverty the way I did, okay, we— I didn't, you know, My mom doesn't own a house. My grandparents didn't own their house. Their parents didn't own a house. Like, there's so like, poor people don't have the opportunity to save. Like, I don't say I can't. Anyway, the whole like idea of credit never made sense to me unless I was going to the corner bodega and asking for a pack of cigarettes for my mom on credit until she got paid. Right. Like that was the furthest credit went for me. So like growing up, I remember going to trying to get into college and applying for these loans and I was getting denied and I didn't understand why I was getting denied. Like I never had credit. Well, come to find out, I had, I love you, Mom, but my mom put a bunch of bills in my name when I was a kid.

Ouch.

Right? Yeah. So like before I was even an adult, my credit was zero.

Yeah, that's bad right there.

Well, it's not bad. She had to do what she had to do to survive.

No, I get it.

I mean, like we wouldn't have had electricity if she wasn't able to do that. We wouldn't have had a telephone if she wasn't able to do that. So like, I remember being really upset with her for a while. But then understanding like, this is how life was, this is what it was worth. And for the past couple years, I had been like really focused on that, right? Like, trying to increase my credit, get my credit better, this, this and this.

And nothing is—

nothing. I don't, I don't have— there's no benefit I can say, like, I don't have a there's nothing that I can, you know what I mean? Like, for me personally, like putting, paying my bills on time and doing all this, it's not benefiting me in any real, like real-time scenario. Like, I don't see the, the, the, the benefits of it at all. Like, teaching my children about it, maybe, you know what I mean? Maybe it'll me breaking the generational curse.

Yeah, that's what it is. The, so the generational curse needs to be broken, and people need to understand the importance of, you know, financial literacy and understand how finance— how, how financial system works and how to—

don't have kids.

Don't have kids.

No, I mean, I owed $70,000 to the state of Wisconsin still. Okay.

Ouch.

$75,000. Listen, it's increasing every month even if I'm paying on it. It's just ridiculous. Wisconsin is— you guys are out of your mind.

I mean, listen, I got divorced. I mean, I saw the— I was at the bottom of the barrel, okay? Broke. No car, no nothing at one point, you know? And I just said, I gotta figure this out, you know? And I figured it out. I mean, it wasn't pretty. I didn't have money to do anything for quite a long time. And then I dug myself out of a big financial hole. I mean, I thought I was going to have to go bankrupt.

I'm 2 paychecks away from filing bankruptcy for sure.

And it just didn't— It didn't at the time. It just didn't make sense. I sat down with a lawyer and he's like, no, you can't, you know, you can't do that. You got to, you know, and I ended up going—

why can't you do that?

Well, because I just didn't. If you owe like a couple, if you owe like $150,000, $200,000, yeah, it makes sense. But now they have new rules about bankruptcy. So the new rules with bankruptcy is, is they take a look at like, say, okay, well, you want to go bankrupt. But we're not going to let you go completely bankrupt, and you're still going to owe some money, and you end up having to pay a portion of the money based on the money you bring in. So they changed like the bankruptcy laws a few years ago.

I mean, you'd have to be— for me, I'm definitely not in that tax bracket.

Well, I'm just saying there's people that have run up, you know, $100,000, $200,000 on credit.

I mean, I'm not making $200,000.

No, I understand that. So they make you pay back 5 grand or something crazy. You know, I'm just giving you an example. So it's difficult. Listen, I lived through that where I had to, you know, I had to deal with that and I went to like some credit company and they renegotiated all the rates with the credit cards and all that. And then I had to start from scratch. I paid off all the bills. Got it down to zero, spent like barely any money. I was paying a huge child support and dug myself out of that. And that was, you know, but you know, it's important to learn about, you know, opening a bank account, having a bank account, being responsible with a bank account, not bouncing checks, not—

I never did that—

not overdrawing your account.

Don't do that.

And then You know, when people are running a business, you know, my brother puts businesses into business categories. So you put, you have, you know, businesses that are owned by individuals. So he says you're either a lifestyle business or you're running it like a real business. So a lifestyle business, maybe you're paying your employees in cash, you're not accounting for everything, you're not really watching all your money. I mean, we sat with a guy at a meeting. He goes, "Oh, I don't worry until I don't have any money in my bank account." Remember that guy? And he goes, "Then I run around making a bunch of sales so I have money." Or somebody that's using, I spoke to a guy yesterday and he's trying to get a loan for his business. And he says, "Oh, well, I get money from credit card processing," which he does through us. And he gets another portion of his money through PayPal. But he doesn't deposit the PayPal money into his bank account. Basically uses PayPal like a bank, so he leaves the money there, and then when he has to pay a supplier, he pays them out of PayPal.

And that's because people still think that the government isn't looking at PayPal.

Yeah, I told them that. I said the government looks at PayPal.

Although they— I did read something this morning that they— it back— they bumped it back up to $20,000. So they're not really— well, he's checking for you.

Yeah, he's the PayPal still. If you have a federal tax ID number, they're sending you a 1099-K.

Yeah, I didn't get a 1099-K from Pointe.

Really? That's weird. It's probable.

And I go to generate the report.

Yeah.

And there's nothing there.

Huh. We'd have to send him an email or not. Or not. Don't worry about it. Who knows? I have no idea.

I mean, I didn't make $20,000, that's for sure.

Right. So the whole thing is, well, they should, that's weird that they didn't do that. But the whole thing is, you have to, so then the loan company doesn't see that cash going into the bank account, right? Where they're going to get paid from. So they're not seeing that cash flow.

Which is, yeah, which is just not smart on the business owners.

So I was explaining to them, I go, 'Oh, you're bringing in another 10 to 15 grand through PayPal.' Yeah, but they don't look at PayPal like a bank account. PayPal is not a bank account and you're using it as a bank account. And I even see people using Stripe as a bank account. Like they do all their Stripe transactions, they leave them in there for weeks and then they download it, then they request the money to come. You shouldn't be doing that because the bank wants to see that you're doing business on a regular basis, right? That you're getting regular deposits in and not just this chunk once a week or every 10 days, right? It doesn't look—

I remember going crazy over my D&B score. Yeah. Dun Bradstreet. Yeah, that's your business credit.

Yeah.

We were, you know, like I was doing numbers, like I was doing well for myself, right? Mike, it wouldn't do anything.

Yeah, they don't— they only monitor what if companies report back to them. So very few companies report anything to D&B. You can go—

why is it, why is it so important to sign up then?

I don't— I signed up once because we had to have a D&B number to get set up as an Apple developer.

There's a lot of companies that have to— that force you to do that. Yeah, there's a lot, so you have to do it, right?

So there's another way you can check your business credit. There's a site called nav— nav—

that you have to sign up for that too.

You don't have to pay.

No, you don't have to pay, but paying is better than the free version for sure.

And you can see what's going on with your business credit, and they check more sources like Equifax and those.

But they connect your— like, because it's connecting you, you Yeah, if you connect your—

well, then you look at your personal credit and your business credit, right? But you could also connect your QuickBooks there if you really wanted.

PayPal, all of that.

If you wanted to get like a business credit score and you needed it, you could do that. You know, but—

Because I was looking to— I wanted an office, right? And a lot of times, I don't know, this was in Milwaukee, so they were asking, well, what's your business credit score?

Oh yeah, they asked when we got this office, they wanted the— they used some third-party service that got our business his credit score.

Exactly.

We had to give them bank statements.

Exactly.

I wanted to make sure we could afford the thing. And when they're—

that's kind of around the time I started freaking out about my credit. Like, I was at like a 290 or something.

I don't even think it goes less than 500.

Oh yes, it does.

It does? Wow. Okay. Yeah, I mean, to get like a consumer loan, your credit's got to be like in the high 5s or low 6s. To get a consumer credit loan. Usually, like, even the buy now pay later companies, most of them now are checking your credit because they're issuing credit cards to people like Affirm and those type of companies, you know, or a person.

It doesn't hit your credit report.

No, they, they do now with the credit card. No, with the—

if you have the Affirm card, right?

That's what I'm talking about, the Affirm card. So They're— yeah, I don't know. I don't have one, but the, uh, I don't have one either. I just see them offering it now. I guess they're trying to get more people on their card.

It's probably not a bad idea because they don't charge— the interest rate is so low on those things.

Yeah, the interest rate is less than— it's a little bit more to the merchant, but you know, if merchants are making extra sales from it, then you just have to look at it that way. Like, oh, I'm making an extra sale, uh, losing a couple of bucks, but I'm making an extra sale, right? So, you know, you have to look at that way. But, you know, your business, you know, your business credit, you know, you just, you know, you have to, you know, those are places to monitor it. D&B is one that's expensive. Navs, you can look at it for free. You could pay if you really need to build your business credit. One trick people used to do is there was a couple of websites. One of them was a client of ours. And let's say I had a credit card with a $50,000 limit. I could list my credit card on there and there were people that would pay me $300 to $500 a month if I would put their name on a credit card and then they wouldn't get the card. I would have the card because they can't charge anything. But like my credit for that card would appear on their credit report.

Right.

And give them— but now the credit card companies figured that out and they don't list They won't— they don't list those anymore.

Yeah, we signed our kids up for all that.

They saw— they took that away. If the name matches, then they'll put it on there, but if the last name doesn't match, then they don't— they don't show that.

Yeah, we put all our— well, the youngest— I tried with my— one of my daughters, but that didn't work.

But it's also important, like, if you're running a business, you know, a lifestyle business is somebody running a business, they're just running it, they're just draining all the cash out, right? And there's no cash, like, in the business. That's a lifestyle business. If you're running a business and you're trying to build the cash reserve in your business, you have a cash reserve.

I don't agree with that, man. What? I mean, people out here struggling, how the hell they can't keep a cash reserve?

Well, keep some money. You might not be— how do they keep it?

How?

By making—

I don't know how that is these days, bro. Like, but I digress.

Increase sales. And I'm just saying, like, I'm just saying people can do it. Okay.

Increase sales. Well, make a sale.

I understand that, but I'm just saying, like, you know, when you want to buy things, if you need to buy something, the other thing is it's important when you do get open a business that you get a card in the name of the business under the federal tax ID so that you're doing that. And the other thing is you don't use it ever.

Only on small purchases and pay it off before the due date.

Yeah, make sure you're not getting a card that also—

There's no revolving balance.

Right, make sure you're getting a card for that that doesn't charge daily interest. So you put your gas on there, maybe some other small purchases and pay it off. So you can build up the balance because maybe one day comes like for us, we needed to buy an ATM machine. Okay, it was, you know, we needed 3 of them. It was $10,000. We slapped it on a credit card. We didn't have $10,000 in the bank at the time.

Right.

And there was an opportunity to make that money back within 3 or 4 months. So we know, okay, it's a good risk to take. Okay. So that's why you need to have that credit card handy. Yeah. Because otherwise there would have been no way to pay for those ATMs. And then, you know, so that's how, you know, you have to like, you know, you make baby steps and you grow that. But the other thing is bookkeeping, having QuickBooks and linking your bank account and your credit cards in there and your PayPal. Because if you're trying to get a loan and then your bank account, you got this thing going on with PayPal and then you're not having a ton of money in your, you know, flow in your bank account, you could show them your QuickBooks file. And then that would show a better picture of your finances, of your business. And that's what people don't, don't understand is that, you know, that the bookkeeping is important when it comes to your business. It's like a big one. It's a pain in the ass thing to do.

It's not a pain in the ass.

It's just time-consuming.

Time-consuming.

Yeah. So you just have to learn how to do it. I spend a couple hours a month on it. Okay, spend a couple hours a month on bookkeeping stuff, you know, and that's just what you have to do. You have to schedule that as part of your time. Okay, I'm going to do that. And when you have enough money, maybe you have like you get a bookkeeping service that charges you maybe $100 or $150 a month, you know, or QuickBooks has it through their thing and you and they match up your bank statement, you know, your physical—

watch the video on how to manage QuickBooks. It's free. QuickBooks has a YouTube channel dedicated to it. It'll take you 45 minutes, if that, and do it yourself. Yeah, I mean, you literally have an hour a week. It doesn't even take you an hour, bro. After— I mean, I don't know, I was never at scale where I'm doing like $100,000 a month, but you know, that's a different story for some people. But you know, like for a small business, you have the time to manage your—

yeah, it's only going to take you, if you do it weekly, could take you half an hour every week. Yes, you do it once every 2 weeks, it depends. You just gotta fit it into your schedule, you know.

That's going to take you longer if you wait every 2 weeks. That's why I did it every week.

Yeah, so you do it every week, you update the links to your bank account and your credit card and your PayPal or whatever, and you link it all in there. But it's more important when you're trying to get a loan. One of the things the loan companies look at, how many deposits are you getting into your account?

Yeah.

So if you're doing business every day and you're doing business with a PayPal, a Square or Stripe, and then you're leaving your money there and then only waiting to transfer it once a week, you shouldn't do that. Should be taking the money every day, every day, every day. So that you don't have to— so that you can show that cash flow in your bank account, because that's very, very important.

Yeah, and it's all about, you know, slowly building it up, because, I mean, that's also how I would say to get out of PayPal or Stripe, because they're taking that money every time you transfer that, right?

They're charging you your merchant processing fees, and then they're charging you a transfer fee to transfer your money.

They call it a transaction fee, right? I don't know if they call it transfer fee now, but when I was using PayPal, it's like a transaction fee. So like to, to put the money, they charge you like $35 just to move some money. Right.

We don't—

that's a tank of gas.

Yeah. Today, I mean, we charge—

well, not today.

No, I'm just saying, like, we have a batch.

Gas is crazy again.

Oh yeah. Gas is out of control. No, but every day when you have a regular merchant account, you batch out and the money goes to your bank account.. So you don't have to worry about getting deposit, going online, clicking a button, sending the money, which will make your accounting a lot easier.

You won't have to deal with that. Like, yeah, I would highly suggest to get away from PayPal. I don't— I've never used Stripe or what's the other one, Square, right? I never— PayPal, I mean, least of the, the least of the path of least resistance was PayPal, and that's why it's you know, so still so popular, but it's still like, they get you, especially like, you know, someone's sending you a bank account to like a payment straight from their bank. They get even more money from you.

Yeah, and even when people are transferring money inside of PayPal, you're paying a fee and they're paying a fee. So, but it's all about, you know, you want to build your credit, so you have to, you know, Having a merchant account, having a credit card, having bank state, you know, a bank account, building up a little bit of reserve cash.

So what is some advice that you would give to a kid straight out of college? He just launched his auto detailing business. What is the first thing that, you know, for to help build his credit, what should he do?

Well, the first thing I would start with high schoolers, you get out of high school, The first thing you should try to do is get a credit card.

I said the guy just started a business.

Right, I'm saying, oh yeah, well I'm saying, okay, guy just started a business. Go to the bank, open a bank account, make sure you form your corporation. If you're selling something funky, make, get a generic name.

Let's say he's got a, he's an auto detailer.

Okay, auto detailer, get a bank account, get a merchant account. That's the first things that you need to do.

No, I'm saying to establish, what is he gonna do to build his credit?

So if you have your, you get your credit card, purchase your supplies.

How does he get a credit card if he doesn't have credit?

Sometimes you might have to put $500 to the credit card company, or a lot of times you get—

you saying get the prepaid card if you have to.

Sometimes you don't have to do that if you got a credit card like while you were in college, you had a personal credit.

This guy doesn't have any of that. He's totally shit out of luck. He came from a shitty, shitty background. He's got no support, he's got no savings. He's just, he's just, he can't find a job with his degree. And bang, he says, you know what, I'm gonna detail cars.

So maybe you get a debit card from the bank. Then you see if you can get a prepaid card from a bank. Maybe you have to put a couple hundred bucks on it. And then you put some small charges on there every month, but you want to pay for your supplies using either your debit card or your credit card. And then As you get money, pay that balance down. Listen, I taught my son, I said, oh yeah, put gas on there. And he pays his credit card every week or every 2 weeks.

Right.

And keeps the balance at zero, you know, zeros it out often. Right. And as you do that, then the prepaid card people are going to go, okay, we'll give you your $200 or $300 back. You get that money back, we'll raise your thing up to $500 or $1,000. And you just keep doing that cycle.

Right.

And that's what you have to do because maybe you say, oh yeah, I'm detailing cars. Okay, now I want to get a spot. Now I want to hire 2 guys and make sure that you're not paying them cash and you go set up payroll so that there's a payroll, you know, company and they're getting paid a paycheck. And, you know, that's the kind of thing you want to do. But a lot of businesses, their biggest struggle that they have is, okay, I got to this point. Maybe you have a business partner. Okay, we're really busy. Okay, when should we hire our first employee? And then a lot of people don't want to cross that. They don't want to cross that bridge. But that's a tough—

How does that build their credit though?

Well, I'm just saying you're building your business. As you're building your business, you're building up your business.

What are some other things you could do to build credit if you have bad credit?

If you can, you can try to get a line of credit from your bank after you've been there for a while. Maybe they'll give you a $5,000 line of credit. Maybe there's a piece of equipment you want to buy and you can finance it through your bank. Because if you're running your business and they see you have cash flow, and so this guy could afford a $150 payment or $200 payment to lease this equipment or buy this equipment, that's the kind of things that you have to do. You have to, you know, you have to—

so basically you got to invest in yourself and in your business in order to build credit and pay your bills on time.

Definitely got to pay your bills on time, early.

Pay your bills early and often. Pay it off in chunks if you have to. But yeah, so I don't know, if you learn anything, let us know. We'd love to hear from you. That's the pod about the importance of credit. I'm sorry if I'm— my, my, uh, angle is tainted, but yeah, you know, it is what it is. Shout out to everybody with a great credit score, leading the path of do-gooders. Anyway, man, check out the subscribe— subscribe to the channel. B2B Vault, Biz to Biz Podcast, and get free credit monitoring set up.

You know, there's free credit monitoring.

That's the jewel right there out of the whole podcast.

Yeah, get that set up. If you have a business, get— look at NAV, see how, you know, look and see. That's what people are doing when they're doing business with you. Sometimes they're trying to sell you something, they're looking at that.

Yeah. All right, smash that subscribe button. Like and comment. Peace out.

Peace out. Carpe diem.