While established companies have their own financial reputations, an early startup will be tied to its owner’s personal credit score. Because of this, according to Entrepreneur.com contributor Karin Price Mueller, small business owners need to take a close look at their credit reports before attempting to start a corporation.
All three credit bureaus allow people to get a free copy of their credit reports each year through annualcreditreport.com. Other sites and television ads offer "free" reports, but generally require a monthly service plan as well. The most important thing to do, Mueller says, is to fix any mistakes on the credit report. After a charge or account is disputed, the credit bureaus must investigate within 30 days.
To help improve a struggling score or push an average score into positive territory, Mueller says that it’s essential to pay all bills on time and lower the balances on the accounts already open. Thirty-five percent of a personal credit score is based on payment history.
The Wall Street Journal reports that banks may be willing to give entrepreneurs a smaller line of credit – up to $20,000 or so – if they have a solid personal credit score, allowing them to buy inventory or equipment necessary to get their business idea rolling.