Why you should fix your personal credit before you start your business

Even if you follow all the advice in the section on establishing business credit, it's a fact that you're not going to get business credit immediately upon starting your business.

Your initial start-up funds will have to come from either cash in your pocket, or your own personal credit. If your personal credit is poor, you're going to have a very hard time raising enough cash to get your business past the first year or two of startup time.

Harvard Business School's 10 Rules for Successful Entrepreneurship

1. Don't run out of cash.

2-10. See Rule #1

It might be an exaggeration, but it's generally true that you can never have enough cash when starting your business. Even established, professional businesses can run out of money during the first 1-2 years after staring. You'll need to draw from your own credit in the beginning. There's nothing worse than seeing a business with lots of potential fail because of lack of cash at the beginning and no credit from which to borrow to keep the business rolling. 

You must get your personal credit in order before starting your business. 

There's no magic wand to make someone walking out of bankruptcy court have perfect credit, but there are ways to manage your money such that you get maximum increase in your credit score in the minimum amount of time. The difference between having good credit and bad credit can literally be the difference between financial freedom and debt slavery.

What works to improve your personal credit

There are many ways to legitimately increase your credit score. On the most obvious level, we all know that if you pay all your bills on time and don't max out all your cards, then your credit will be good. 

However, there are many nuances to how your score is calculated such that minor differences in how you manage your finances can make a major difference in your score. 

For example, your credit score is much more heavily affected by the amount of credit card debt you carry than the amount of your mortgage debt. So, if you have $1,000 to use to pay off debt, you are much better off paying down a credit card than paying extra on your mortgage. 

In fact, after having a timely payment record, the next most important component of your credit score is the ratio of your credit card balances to the total available credit line. So, if you have a credit card with a limit of $10,000 and carry a balance of $1,000, that is much better than carrying a balance of $1,000 on a credit with a limit of $2,000. 

A good credit repair book or course will inform you of how credit scoring works and direct you to maximize the increase in your score with each dollar you spend and each account your open. A great credit repair program goes beyond information and actually gives you tools to challenge negative entries on your credit report and scripts for talking creditors into raising your limits. 

Not only will you learn why it's good to increase your credit card limits, a great program will tell you exactly what to say to your credit card company to get your limits raised. The credit improvement resource below will explain in a high level of detail how your score is determined. You'll improve your score much faster by knowing exactly what financial steps to take to maximize your credit score increase. Excellent personal credit improvement resource:

The Credit Secrets Bible (5/5) Recommended

Obviously, a lot has changed since the mid-90's, and the Credit Secrets Bible has kept up. 

Of all the credit "secrets" and information courses out there, this one contains the least amount of misinformation or hype in its sales and promotional material. 

The best aspect of the CSB is that it doesn't just inform you, it also provides you with the tools to fix your credit. It contains form letters to use to challenge incorrect information on your credit reports, phone scripts for talking credit card companies into raising your limits, and software for tracking your payments. 

This is a bigger advantage than you think. Any book or report can tell you to "write a letter to Experian (a credit reporting agency) and object to a negative entry in your credit report." The real trick is knowing what to write in your letter. 

The Credit Secrets Bible includes sample letters used by credit repair attorneys and clinics that you can customize. 

It's infinitely easier to customize a pre-made letter than to sit down at a blank MS Word screen and try to figure out what to say to contest a negative entry on your report. 

If you don't already know all the ins and outs of how your credit score is calculated, and want some great templates of letters for challenging negative entries in your credit report, then you should think of picking up a copy of the The Credit Secrets Bible 

The Credit Secrets Bible cost $67, which is reasonable. However, if cost is an issue, there are a couple of other credit improvement products available in the marketplace. 

Who doesn't need the above resource(s)? 

If you already know exactly how your credit score is determined, and the only reason your credit is bad is because you spend more than you make, then you don't need any of the books listed above. If, however, you don't know whether it's better for your credit score to pay off your auto loan or pay off a credit card; or you don't know if it helps or hurts your score to close an old credit card account, then you should consider a purchase.

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