Using Credit to Build your Business
Today I wanted to chat about building credit and how to improve your position with your business using credit cards. The first thing I want to say is that when it comes to credit, it’s not exactly a straight forward process to build it. However once you begin as long as you’re smart and reserved, you can not only build your credit score but also your credit limit.
Personally I’ve done a lot for my credit because I am a proud home owner and entrepreneur. To be able to buy a home requires a ton of smart credit building, so let me explain the initial steps, how to avoid getting turned down for approval and more. The first step is to go to your bank, whoever you use for a checking and savings account, and start a secured credit card. If you don’t have a checking account and savings, that is the first step is setting one up.
Personally I always like the credit unions better than anything else. I have an account with a couple credit unions and I like them because generally they are non-profit, so they aren’t going to be cashing in much on your interest rates and overdraft fees etc. But once you have a savings and a checking account created, you’ll just have to come up with a little bit of cash to create a secured credit card.
A secured credit card is basically when you use some of your own money to start a credit card that has a 100% approval rate. The reason you can guarantee approval is because you’re putting your own cash into the card, and you can only spend as much “credit” as is on the card in cash. That way if you put down $300, you have a credit card with $300 credit limit which you can spend money on. It’s safe for the bank because if you mess up and can’t pay them back, you’ll find that the bank will simply use the cash you’ve put up to pay them back in the end. So there’s no risk for the bank, the risk is all on you.
Once you’ve gotten your first credit card through secured means, the next step is to simply spend a little money on your credit card and then pay it off. Generally I suggest just spending $25-$30 per month, and paying it off the following month each time before payment is due. By making small payments like this, you keep your risk low and your credit score will rise very quickly. Plus, then you avoid high interest rates which is basically like throwing money in the toilet. Or, more accurately, throwing money into your bank’s pocket.
After your initial credit has been built up, it’s time to get another credit card. A good credit card to go for is something like a local store credit card because they’re easier to get. Target, Walmart and other large companies which offer credit cards are good news and normally pretty easy to apply for and be accepted into even with small amounts of credit. Be sure to give yourself a good six months minimum of paying onto your secured credit card before going elsewhere with it.
After that, it’s just all about making monthly payments on your credit cards. Nothing will build your credit faster than having multiple accounts, spending only what you can pay back, and paying the cards back each and every month. While I technically can’t call this “financial advice” since I haven’t gone to school for financing, these are some good tips to get you started building credit.
Once your credit is built, the next step is to get a big fat credit card and spend on your business wisely. Sometimes a small loan or credit card is all you need to get your business off the ground officially! Be sure to purchase some of our products and courses in order to learn more about selling beats online and running an online business in general.