When an entrepreneur has a good credit score, it makes it easy to start a venture. However, several business-savvy entrepreneurs have to place their entrepreneurial ventures on hold because of their low credit histories.
It might not seem very easy to build credit for young entrepreneurs. However, when they know about essential credit management, they will get better prepared to safeguard their essential business credit in the future. It takes time to generate a solid credit history. Hence, Mark Elenowitz shares a few steps that will help entrepreneurs to build credit.
1. Understand what lenders search for
Before you start to search for lenders and creditors, it is essential to learn the factors they consider when assessing your application. Several variables impact the credit score, and lenders and creditors consider several of them. The net worth, annual earnings, utilities, and residency listed under your name are a few factors that highlight financial stability and creditworthiness. For instance, making the utility and rent payments on time impacts the credit history by allowing the professionals to know that you are reliable and accountable in paying bills.
2. Generate experience with department store cards
Most of us have shopped at stores that attempt to convince us that we need a credit card to get an extra percentage deducted from the purchase. Even though this pitch is usually a lackluster annoyance, the store credit cards help you generate good credit. It is essential to ensure that you make the minimum payment monthly. You can pay more when it’s possible. Else you will get left with paying an increased interest rate that denies all you’ve saved by signing up. Using a department store card will help you get the necessary credit experience to identify how essential it is to pay charges on time.
3. Leverage secure credit cards
You might want to opt-in for a secure credit card if:
- If you lag in credit card payments
- You can’t get sanctioned for a department store card.
You have to offer a cash deposit for a secure credit card before you use it. It is the maximum limit for the account. For instance, if an entrepreneur has deposited $1,000 in the account, they can spend the same amount. Like regular credit cards, secure credit cards might come with application fees, annual fees, and processing fees. Hence, it is essential to shop for the best card that comes with the lowest fees. It would help if you validated that the card provider effectively reports to the three crucial credit bureaus. Else, owing the card will be redundant in terms of developing credit.
4. Manage your cards accountably
Once you have a few cards, you must manage it all accountably. It would help if you took care not to get caught up in a downward spiral of opting for frivolous buys beyond your capacity. It would help if you had the means so that you can pay the bills.
As a new and young entrepreneur, it is natural for you to have several queries about credit. You must have the answers before you apply for several loans and cards.