Mark J. Kohler explains why lenders check your personal FICO score before extending credit to your business EIN, and how to build a Paydex score by registering with Dun & Bradstreet and opening credit lines under your company's tax ID. Building business credit takes time and can't be rushed, despite what scam offers promise.
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Hi, Mark Kohler here and let's talk about your personal credit and why it's tied to your corporate credit. Now I know this is a big topic as to why even corporate credit matters and can you get corporate credit and how do you use it? This is a huge topic and I love it. And a lot of small business owners don't realize the real power and potential of building the corporate credit score for your LLC or corporation. However, there's all those scam artists out there that of course are selling these shelf corporations and big expensive packages to get you corporate credit. Watch out for those and always get a second opinion. I'm not a fan of these prepayments promising these credit lines that really never appear and if they do, they're expensive and gosh, the interest rates can be off the chart. So be careful. So let me start with three principles that will help you build your corporate credit score and it really is legitimate and can help you in the future. Number one is your personal credit score. Yes, it's tied to your corporate credit because it's going to jump start it. Those banks are going to rely on your personal FICO score as they start to issue credit to your corporation's tax ID number or your LLC's tax ID number and give you a Paydex score for your company. Now the better your personal credit score is, the faster you can build corporate credit. So step number one is repair your personal credit. I think it's so important that you're getting, monitoring and challenging those negatives on your credit score getting the right balance of the credit mix. I've got a ton of information in my book on ways to build your personal credit score. Number two is start building corporate credit which means getting your company set up. Could be an LLC or corporation. Typically for an operating entity it's going to be an S corp. But you're going to get your tax ID number, get a Dun and Bradstreet number and start using that credit, that company tax ID number to build credit lines. Now there again there's a whole other process and steps you should take to do this. But the important thing is to start building the process now. Number three is be patient and maintain the system you started. It doesn't happen overnight. Rome wasn't built in a day. And the difficult part here is that it can't be fast tracked and don't be frustrated by that. In fact, be careful. If anybody is promising you a quick corporate credit strategy for a big check, do not spend big money for this. It's all about patience and getting those companies to report your good credit history back to your paydex score and your company credit line and all those different things that kind of play into the process. Finally, keep learning about this topic. It's a big one and there's lots of techniques and strategies to implement to build your personal and corporate credit. I try to share these strategies and more on a weekly basis, daily basis with my social media channels, YouTube, Facebook, Instagram. Please check me out. I hope I can be of service to you. Thanks.
