Entrepreneurs Don t Have Average Credit Scores
Below is a MRR and PLR article in category Business -> subcategory Small Business.
Entrepreneurs Don't Have Average Credit Scores
Summary
Fair Isaac, the company that created the formula for determining credit scores (FICO), bases its calculations on average consumer statistics. Typically, the average consumer:
- Has one credit inquiry annually
- Carries a balance below $5,000 on all debts except for a mortgage
- Has a total credit card limit of $12,190
Why Entrepreneurs Stand Out
Entrepreneurs, however, aren't your typical consumers. If you’re running a business, your credit needs can be significantly different, leading to a less conventional credit profile. This is why many entrepreneurs see their credit scores drop after launching their businesses.
For instance, one entrepreneur, J.G., experienced this firsthand. Since starting a business, J.G. applied multiple times for various credit lines, which impacted his credit score. Each inquiry can lower a score by about 5-10 points. Although credit bureaus are supposed to treat multiple inquiries within a short period as one to avoid penalizing score dramatically, this isn’t always the case.
J.G. also had a $60,000 credit line with a $42,000 balance, considerably higher than the average consumer’s, which could further decrease his score. All this happened before even considering his personal and business financial activities.
Building a Better Credit Profile
If J.G. had focused on building a separate business credit profile, establishing lines of credit in his business's name, and slowly strengthening his business credit over time, he may have avoided these pitfalls. This separation could have helped him secure the home he wanted for his family.
To address this issue, I’ve developed books, products, and services through Business Credit Services. Our goal is to educate entrepreneurs on reestablishing themselves as typical consumers and keeping personal and business finances distinct.
You can find the original non-AI version of this article here: Entrepreneurs Don t Have Average Credit Scores.
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