Without a full understanding of your situation it`s extremely difficult to determine what is best for you and how to proceed. But here`s information I can offer, as a business owner, that might help you.
Credit is not easy! The formulas involved vary so greatly that you can never seem to get a good handle on what to do or not to do but here`s what has worked for me.
Research credit and understand it as best you can. For example: You mentioned debt to income ratio. If you are paying those accounts on time then consider the following. If you have a credit card with a $5000 limit and you are using $4000 of it you have a high debt to income ratio. Credit reports do not show how much you earn. They look at how much credit you have to how much you are using. If you have been paying on time with your creditors then you may be able to increase your line of credit. If you request an increase in your credit line in can, not always, change your debt to income ratio. BE AWARE they may run your credit to determine if you qualify for an increase. This can have an negative effect on your score. Not much but every inquiry to your credit can have a negative effect. So decide carefully if you feel that you may be able to increase your line of credit enough to have a positive effect. Citicards for example may increase your line without a credit check if you have a perfect payment history. You can request this online and it might occur immediately without a credit check.
Next, you`ve been in business for at least two years, that`s good. Hopefully you`ve had an accountant filing your taxes for you those two years. Having an accountant that can "vouch" for you can go a long way in getting a loan. Even if they simply provide a letter stating you`ve been in business for two years.
Second, if the business EIN does not have any credit established yet there are things you can do to get things rolling. If you have business phones (cell phones) for the business, switch those over to a business account with your provider. It`s easy to do and it will establish credit for the business. You can also consider opening an account with local suppliers. For example Home Depot, under the business EIN. You may not require a Home Depot account for you business but it will establish a creditor for the business. Open an account with a local paint store like Sherwin Williams. Request the highest limit possible. This does not mean you have to use it! Again, the more credit you have "unused" the more credit worthy you can appear.
Look at this way, if you have credit cards all with zero balances then you have the "abilty" to spend up to the maximum of those cards. If you don`t have any balances it can show restraint and control, which banks can feel confident with. Here`s the other side of that coin. If you have all that spending abilty and do get a loan and decide to rack up a bunch of debt on credit cards then you have just that many more payments to make. The bank might also see you as a risk because you have the ablity to spend that money. Like I said credit it not easy.
So what`s the answer? Time. Establish a relationship with a local bank. I mean a local bank. Not a bank in 3 states with 1500 branches but someone you can get to know. Show them what you`ve been doing and your business plan.
One last note. Make sure that you getting the best rate on those credits cards you currently have. If you are making on time payments then call them up and request the lowest rate of intrest possible. If you`re paying too much this could be a quick way to save a few bucks. Push them! They will in most cases help you out. Keep paying everything on time and make sure you pay twice the minimum payments.
sokogoose12/13/2007 12:38 AM