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Contributing Author: Katherine Pilnick
When starting a small business, your personal finances are more important than you may think. You’ll need disposable income for business capital, and a good credit score can help you obtain credit for your small business.
If your finances and credit history are damaged, or if you don’t know where you stand, take some time to review your credit report and look for areas that need improvement.
You may want to work on correcting errors, paying your bills on time or reducing your debt burden.
Tip #1 - Request copies of your credit reports
The first step to improving your credit is requesting copies of your credit reports.
You can request a free copy of your credit report from each of the three major credit bureaus – Experian, Equifax and TransUnion – once every 12 months.
Your credit reports will give you an overview of your recent credit history. They’ll show all your credit accounts and debts. Check each report for errors, as these may be harming your credit report and lowering your credit score.
If you find errors, follow the instructions on the credit report to begin a dispute. The credit bureau will look into the information and delete or fix it if it is inaccurate.
This will immediately boost your credit score.
Tip #2 - Keep track of your monthly bills and payment due dates.
Once you start a small business, you’ll have a whole new set of bills and deadlines to worry about.
If you have trouble keeping track of personal monthly bills or forget to make payments before the due date, now’s the time to address these problems and develop better financial habits.
Different techniques work for different people.
If a simple reminder would help you straighten out your finances, start a reminder system. Buy a calendar and mark each deadline, or set up online bill reminders. You may be able to automate some bill payments, giving you less paperwork to worry about.
If you need more help getting on track, debt consolidation could work for you.
Speak with a debt consolidation counselor to begin the process. This will combine several of your debts and leave you with a single monthly payment.
It typically also saves you money by lowering your interest rates and fees.
Tip #3 - Increase your credit rating by paying off your debt.
Paying down your debts is the toughest way to improve your credit, but it’s also the most rewarding long term for both you and your business.
It will free up more money to put toward the company, as well as reduce your stress levels and allow you to focus on work. It will also boost your credit score over time.
Start with the easy steps like refinancing your mortgage at a lower interest rate. Then commit to not rack up further debt.
Cut back on luxuries like eating out and buying new clothes. Beyond paying for basics like groceries and gas, your financial priority should be to pay down your debts.
For the most savings over time, work on paying down high-interest loans first.
This means that you should start by paying only the minimum on debts like your mortgage and student loans; put any extra cash toward higher-cost debts like credit card debt.
If you cannot afford monthly payments, consider debt settlement.
With the help of a debt settlement firm, you’ll negotiate with your creditors to have your overall debt load reduced. Depending on how much debt you have, this could mean saving thousands of dollars.
No matter how you choose to improve your credit and finances, you’ll notice personal and professional perks of a healthier fiscal life.
About the Contributing Author:
Katherine Pilnick
writes and blogs about personal financial well-being and issues that influence
it for Debt.org, America’s Debt Help Organization.
She is a Certified Debt Specialist and Certified Credit Counseling Specialist who is well-versed in credit improvement techniques. Debt.org’s mission is to help people live debt-free at any stage of life. Connect on Facebook or Follow on Twitter
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