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The business world revolves around credit scores these days. Good credit is especially essential for obtaining small business loans. Maintaining that good credit is vital to the health of your business. Here are three basic credit mistakes to avoid in order to protect your financing options.

1. Using the Same Credit Cards for Personal and Business Use

While credit cards can be a helpful tool in running a business, it is important to use the right kind of card. Many company owners use their personal credit cards for many day-to-day business purchases, but this can have unintended, negative consequences. The business owner’s personal credit can be damaged if there are any financial difficulties at the firm and the payments are not made on time. Owners need to protect their personal credit scores in order to obtain future financing. Only credit cards that charge to the business account should be used wherever possible.

2. Failing to Make Payments on Time

This is the most basic way to hurt your business credit. The largest part of a credit score comes from the firm’s number of timely payments on record. Sliding by for an extra month every now and then might not seem like a big deal, but it can quickly bring down your business’ credit rating.

3. Closing Too Many Credit Accounts

It doesn’t seem to make sense that closing an unwanted or unused account would hurt a credit score, but it is true. Credit agencies look at how much debt you currently have compared to how much total credit you have available. The smaller the ratio, the better. So if you close some of your credit accounts, it lowers your credit limits and makes that ratio grow. Sometimes an account just has to be closed for financial reasons, but be aware of the effect it will have on your score, at least temporarily.


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