How do I choose the right kind of credit card for my business?
Many credit-card companies offer special benefits that can help you with your business, including rewards tied to office supply stores or business travel, rebates that can help with your business cash flow, and special programs that make it easier to keep track of expenses for your records and taxes. But it’s important to pick your card carefully to match your business needs. Understanding credit card features, benefits and tradeoffs will help you choose the right type of card for your small business.
How does a potential credit issuer use a credit score?
Potential lenders generally review your personal as well as your business
credit record when deciding whether or not to grant credit to your small business.
Many lenders — and others — use your credit score to help determine whether
or not to give you a line of credit for your business. Your credit record also
affects your ability to find affordable insurance. So it&8217;s always important to build — or rebuild — a good score…even if you don’t have immediate plans to take out a new loan.
What goes into creating a credit score?
The most commonly used score, called the FICO score, generally measures five key criteria:
- Length of credit history
- Types of credit lines
- Payment history on those
- Amounts owed on those credit
- New credit lines — how
many and over what period of time
How do I know if what's on my credit report is accurate? And what do I do if I find out there's a mistake on it?
A federal law allows you to request a FREE COPY of your credit report from EACH of the three
major credit bureaus once every 12 months. The only free resource
to get a copy of it is at www.annualcreditreport.com.
If you find mistakes on your credit report, you should contact each of the three credit
reporting agencies to report the error/s, and start the process to correct them.
How can I build my business record?
As your business starts to grow, it’s important to build a credit record for your business that is separate from your personal credit record. Getting credit in your business’ name can help you qualify for lower rates on loans and leases, and can help protect your personal credit record — which could suffer if you have too much business debt.
The following steps can help:
- Establish a consistent identity
- Open your first accounts
- Provide key documentation
- Apply for a DUNS number
- Check your business’ credit score
- Expand your credit profile
What can trigger the bank to increase
There are a number of things that can trigger an increase in the APR, but the most important one that
you should guard against is missing a payment deadline.
What is a “Teaser” rate on a
A Teaser rate is the same thing as an “Introductory” rate, which is a lower APR
designed to attract credit applicants. Teaser rates last for a set period of time (all must be
honored for a minimum of six months), and then the rate will increase. Read the rules closely so you
understand the agreement you are making with the credit issuer.
How can I protect myself from fraudsters attempting to trick me into divulging my bank
or credit account information?
Your bank will never call or email you for the purpose of “verifing” your account information.
They already have it.
ignore any threats or expression of urgency you receive by phone or email, indicating
that your account will be de-activated if you do not respond immediately and “verify” your information.
I'm behind on my payments, and I'm uncertain if I can catch up on my own. What
do you suggest?
First, call your lender(s) directly, by calling the issuing bank's customer service line.
Ask to speak to someone who can explore some repayment options with you. When you get the right kind of
banking representative on the line:
- Focus on what you can do. Be prepared to share some ideas.
Sometimes a small change can make a big difference, such as asking to
shift your due date to a better time of the month if you're frequently
struggling to make your payments just before your payday.
- If your issuing bank tries to contact you — respond, and have this type of conversation.
Don't be afraid to talk with the bank, which may be able to make some changes that could make it easier to pay off the debt.
- Make an appointment with a reputable credit counseling agency, if your attempts to negotiate with your
lenders have not been successful. There's additional advice on this step in the next Q&A, immediately below.
How do I find and work with a reputable credit counseling agency?
Interview several agencies.
If you know someone who has used such an agency in the past, ask them for a recommendation. Or, ask friends
or relatives who they would consider if they needed budgeting advice. You can also find credit counselors in the Yellow Pages, by contacting
the National Foundation for Credit Counseling (http://www.nfcc.org) or the Association of Independent Consumer
Credit Counseling Agencies (www.aiccca.org) for a list of members or by using an Internet
Further, The CARD Act mandates that issuers provide three licensed and Government approved credit counseling
agencies or a toll-free phone number that provides that information on each statement.
What are some good signs of a reputable credit counseling agency?
Here's a list of seven (7) criteria to look for/ask about:
- Recognized as a non-profit by the IRS.
- Required to maintain all proper licenses.
- Provides review of customers' income and debts, along with a written plan for reducing and eliminating debt.
- Disperses the proper payments to creditors at the proper times — typically twice a month.
- Provides clients with written statements at certain intervals.
- Offers various educational programs and other ways to help consumers overcome debt.
- Audits accounts.