Building Good Credit

Building Good Credit

As a man of color raised in a single-parent household, I was never taught the importance of having good credit. While I knew having money in the bank was a good idea, I knew nothing about establishing a great credit rating.

Some decades ago, I had a desire to start my own security guard company. I talk about becoming a bodyguard and starting my company in my book Rent a Cop Reboot. As I began to follow my dream, I soon understood that realizing this dream would not be cheap.

While I would eventually see my dream become my reality, I first needed to spend time training and getting certified. I needed money to live on and pay for everything until I could get my business license. I was very fortunate to have family support. My Mom took out loans and gave me her paychecks to see her child's dream become his reality.

Once I was launched, I quickly learned that to be successful in business, I needed to get my financial act together. I needed money to operate my business until it became profitable. Also, businesses succeed in the long run by constantly improving and growing to meet market demands. Changes take money, so having good credit makes all the difference.

While calling on friends and relatives to cosign loans for a car or apartment is sometimes possible if you have poor credit, business loans can be more complicated. You and your business must have a good credit rating to establish a line of credit. For example, you can make major purchases, hire employees, and rent operation space with a business line of credit. I had to learn the hard way how to establish myself and build good credit for myself and my business.

How to Establish Business Credit

To earn a good credit rating and establish a bank line of credit, start by writing a business plan and budget. In the budget, you should plan to pay bills on time and save at least 20% of your monthly income. If you have borrowed money from family or on credit cards to get started, make healthy monthly payments on these amounts. Be sure to purchase insurance, pay appropriate taxes, and maintain any licensing necessary for your business category.

Once you have established these patterns in your personal and business spending, your credit rating should improve. Keep in mind that a bank will look at your personal credit history as a company's principal. There are other things you can do to improve your personal credit rating. Read more here.

Credit Rating Scales

  • Exceptional-800-850
  • Very Good- 740-799
  • Good 670-739
  • Fair 580-669
  • Poor 300-579

With a good or better credit rating, and copies of your business plan, budgets, and other financial records, approach a bank about establishing a line of credit or business loan to take your business to the next level.