Establishing credit score may appear to be necessary evil to many entrepreneurs, yet it’s more of a fun game with secret cheat codes. For you, a good score will be much more than a number. Good score is your reputation among bankers. Trust me, you definitely do not want to initiate negotiations on the basis of paper-thin file.
Do not think of your credit card as a source of money. Think of it as your utility bill helping you earn points. Golden rule – utilization. If your limit is $10,000, try to keep your balance below $2,000.
Your balances are high enough to look desperate from the eyes of credit bureaus. Lower balances mean you’ve got everything under control.
And here comes the secret nobody ever mentions – request an increase of your limit. Twice a year, simply go to your Chase or Amex account and hit the button. Yet do not spend that money, simply let them sit there. Your utilization rate will get automatically improved without any effort from your side.
Looks like cheating, but it is math.
And finally, payment history – the boss you need to kill. Missing even one payment will make your score fall like a crypto coin in winter. Set up automatic payment for the total balance amount right now. Not minimum but total.
Carrying balances does not help your score at all. This is the myth made by people who love paying interests. And, again, bank is the only winner in this game.
Keep as many cards active as you can, including those which do not give any rewards anymore. The length of credit history plays bigger role than you may think. That ancient Capital One card you received in your university times? Just keep it alive by paying for Netflix subscription through it. And this is how you create the average age of accounts. 🛌
Applying for too many cards at once makes you suspicious for lenders. They’ll assume you’re preparing yourself for an army of debts. Do not apply for new cards within 3 to 6 month if you’re interested in sign-up bonuses.
Do not hurry with the process as algorithms become suspicious regarding the sudden desire to credit.
Pro-tip for all entrepreneurs out there. Do not use the same credit card for both personal and business purposes. It seems convenient, yet messes up your personal revolving utilization.
Have a separate credit card for your business expenses. One for office supplies, advertising, etc. Another one for yourself – grocery shopping, gas station refueling. You will thank your accountant during tax season. 🙃
It will take you some time to achieve the desired score level, so be patient. Building the foundation takes time, and you aren’t buying a sandwich by using plastic. It is a delicate tool after all.
Time is your main resource and, indeed, you have tons of it. 📈