You’ve heard the saying “It Takes Money to Make Money”? As a small business owner, unless you have a very large stockpile of cash under your bed, this usually means borrowing, which gets us to the topic of your personal credit and credit score. 

We asked Amber Book, Program Manager for Pittsburgh's Financial Empowerment Center, to explain everything, including why we’re discussing personal credit rather than business credit. You can read Amber’s answers to a few basic questions here or watch her entire presentation (it’s a good one!) by hitting the play button on the video.

What’s a good credit score?

Your credit score is a grade or rating of your credit worthiness. Higher credit scores are better. If you can get your personal credit score into the 670 range, you can get a decent interest rate and terms most of the time. Your credit score doesn’t have to be perfect.

Doesn’t my business also have a credit score?

Yes, but your business credit score and personal credit score are not the same. Small business loans are linked to business owners. So lenders are likely going to look back into your personal history.

How can I improve my personal credit score? 

Pay all of your bills on time. Do this for three or five months and you will see your credit score move up. Also try to keep your credit usage below 30%. If a credit card gives you a $3,000 credit line, don’t use more than $1,000.  And never pay someone to fix your credit score. They're not going to do it any faster or better than you can.

How long does it take to remove a bad mark from my credit report?

Bad information stays on your credit report for seven years. Good information, however, stays on forever. So if you default on a loan or declare bankruptcy, it will fall off your credit report in seven years and won't show up anymore. 

‍I’ve never established credit. Should I?

First, If you don't have any credit established, start now. Get a credit card. You’ll need this whether you borrow for your business or buy a car or house. Second, know that certain types of bills won’t improve your credit score. Paying your water bill and electricity bill on time doesn’t improve your credit score, for example, BUT if they go to collections because you didn’t pay, they will lower your credit score. 

It’s definitely not a perfect system.

How can I find out if something bad is on my credit report?

Go to www.annualcreditreport.com and request your credit report from all three bureaus. It’s absolutely free.

If you're an Entrepreneurs Forever member, you'll discuss options for funding your small business, whether through loans, grants, partners, or investors, and information about the impact of personal credit on your small business during peer group meetings. Non-member business owners can learn more about the program and apply for FREE membership to Entrepreneurs Forever here.