A lot of people don’t know that you can build credit through a business entity, such as a corporation or an LLC.Others think that you build business credit when your profile is trashed.
The truth is, building business credit is recommended for two reasons: (1) it helps to diversify your assets; and (2) it also saves you money on taxes (with all the writeoffs for your business), which helps balance your personal taxes and saves you money in the long run.
The myth comes in when you think you can survive off of business credit as a replacement to your person credit profile after it has been destroyed. The reason is a lot of people / banks / stores or other companies issuing business credit looks at your personal credit in order to see whether your business has credit worthiness. If you have a co-signer that has excellent credit, then this would work, but my recommendation is that you establish a legal entity, along with a tax identification number and a bank account (later on, you will thank me, because most places don’t think your business started until the day you opened your bank account) … while working / rebuilding your personal credit.
It may take a few years, but there is light at the end of the tunnel. A few years from now, or the point that you establish an LLC (which is very easy, by the way) while working on your personal credit, you will be all set to diversify both of your credit profiles. This includes credit cards and business loans that will not be reflected on your personal credit, but many of these credit issuers will look at your personal credit to deem you credit worthy in your business.
For more information, visit our page on “corporate freedom.“