How Small Business Debt Can Affect Personal Credit Rating |
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If you have small business debt, it is best
to place this debt in the name of the business itself. This is only
possible when the business is legally incorporated. For many sole
proprietors or self-employed individuals, it is not possible to operate
a separate business credit account. In this case, a business's debt
will affect the individual owner's credit.
Business Credit Cards
One of the most common mistakes a business owner can make is
taking a credit card in his or her own name and using it for business
purchases. This often happens when a business owner accepts a mail
solicitation to open a card. Even if this card appears to be in your
business's name, it is likely attached to your personal credit. Any
expenses you incur will affect your personal debt, and your own credit
will drop as a result.
Small Business Loans
If you take a small business loan using personal credit, you
will quickly see a drop in your credit score. This occurs because part
of your credit score is calculated by the size and number of loans you
have in your name. If these loans are larger than your asset base, you
will be considered a bankruptcy risk, and neither your business nor you
personally will receive loans easily.
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