When it comes to credit repair for your business, there’s a lot to learn. Your credit score impacts your life in more ways than you may think. With a good credit score, you will have a better chance approved for loans and credit cards, and you will be paying a much lower interest rate.
Having a good credit score also gives you more leverage in negotiating for lower interest rates and higher limits on credit cards and business loans. You will also likely be able to avoid certain deposits on rental properties with a good credit score, not to mention being approved faster.
Let’s go over business credit repair and what exactly your credit score can take its toll on when poor. At ProFinance, we want to help those business owners and individuals repair their credit.
Owning Poor Credit History
Insurance rates tend to be lower for those with high credit scores, as well. On top of all of these benefits, another huge reason to strive for a good credit score is for the relief of stress.
Financial debt can lead to extra emotional stress, marital/family issues, and difficulty in building and raising a successful business.
However, business essential bills, loan payments, and other debts may quickly add up and leave you with a poor credit score.
Another big source of debt is cash advancements, which occur when someone takes a cash withdrawal from their credit card. Unlike a debit card withdrawal, you are taking money out of the account that you have to pay back – and this will typically come with a substantial fee.
As a matter of fact, a recent study shows that at least 80% of Americans are living in debt.
American citizens have an accrued debt of trillions. Repairing a poor credit score can be time consuming and daunting. While debt is very common, it may not be as difficult to repair as one may think, especially not with the help of a reputable credit repair business.
A lot of people don’t know where to start or how to make a case to address their debt with minimal financial loss. If your debt feels overwhelming, it may be in your best interest to recruit some assistance.
Hiring a Credit Repair Company, and the Process
Firstly, your hired credit repair company will give you a consultation. They will pull a credit report first to determine that you are a good candidate (if you have debt that negatively impacts your credit score, you are a good candidate.)
After they’ve determined that they can help you, they will go through your debt one-by-one and try to find any mistakes on the creditor’s end that they can dispute to get rid of completely.
For example, if you received one medical service but you were charged for another, a credit repair consultant can dispute the incorrect charge with the creditor and have it removed from your bill. A good credit repair consultant will evaluate your credit report, figure out how your credit score was determined, and then work towards repairing it.
A credit repair consultant will also help you by coming up with a Debt Management Plan (DMP) to minimize any unjust debt and come up with a new plan of how you can pay off your debts within your financial limitations.
A huge issue that leads to debt is the inability to pay the minimum payment a creditor may request outright.
Your consultant may be able to negotiate with the creditor for a new minimum payment that better suits your lifestyle. Your consultant can also go over your monthly payments with you and generally assist you in lowering them by eliminating charges that are not necessary.
Credit repair consultants can also dispute collection fees.
At the end of the day, your credit repair company will advocate for you and your credit.
When you enlist the help of a credit repair consultant, conversations regarding your debt will be handled by them as opposed to coming through you.
Your credit repair consultant will speak with banks, debt collectors, and credit card issuers on your behalf regarding your debt to figure out how the debt can be addressed in your best interest.
Communications can occur via email, phone, or mail. Mail is preferred for many credit repair companies.
Preventing New Debt
As frustrating as it may be, there is no quick fix for repairing your business credit score.
Going line-by-line through multiple credit reports, searching for creditor mistakes, and disputing charges is a very time consuming process. There can be a lot of back and forth between consultant and creditor.
However, resolving debt and improving your credit score is a very worthy investment of time. While a credit repair company can assist and advocate for you in repairing your credit, there are also things you can do to assist in not worsening your debt.
Forming New Credit Habits
Firstly, and most obviously, be wary of creating new debt.
Try to avoid opening new credit cards or applying for new loans while in a lot of debt. It is always recommended that you wait until your current debt is resolved before creating the potential for more.
In the same vein, it is important to really think it through before making the decision to close an existing account. While failing to pay off your credit card in a timely manner can result in debt, using a credit card appropriately is also crucial in building your credit score.
Instead of making big purchases that you would be unable to pay off when the payment is due, try to make small purchases on a credit card through the month and pay them off as soon as they are due.
Secondly, avoid lying to collectors about the reasons for your late payments. Debt collectors will reach out often and be pretty aggressive in their approach to collect the money owed.
Lying can get you into legal trouble with the collector, which clearly will not benefit you in the long run.
Most debt collectors are trained to succeed by putting their debtors on the spot – for example, “You have accrued a collection fee of $50. You can pay this fee today, and then pay off the rest of your debt later.”
A common mistake people make is paying the collection fee in an attempt of getting the debt collector off of their back. This will only work for a short period of time, and in most cases, the collection fee can be removed with some negotiation.
Debt as a Business Owner
The process of repairing debt as a business owner is a little different from personal debt, and it typically has a few extra steps involved.
The most important part of being indebted as a business owner is understanding where all your debt is coming from.
Keeping track of all money spent on your business is a great place to start. Losing track of where the money is spent can lead to a lot of mistakes, and perhaps even accruing some debt that is not valid.
A credit repair company can still be hired to repair business debt and the beginning steps are the same for the most part.
You can begin the process by sending a debt validation letter to your creditors, this is essentially a request for the creditor to confirm that all debt is accurate.
A lot of the time, in doing this, the creditor will realize that the amount you owe is not actually up-to-date, and you may owe less than what they originally requested.
It is crucial to tend to any inaccuracies as soon as possible. The longer this is delayed, the longer it will take to resolve outstanding debt.
A Debt Free Life
When you are really struggling financially and are in the pits of debt, imagining a debt free life can feel like a pipe dream. Debt can be tolling emotionally and financially, especially as a business owner. But there is a light at the end of the tunnel regardless of the severity of the money owed.
Luckily, there are plenty of options and resources for dealing with debt and improving your credit.
Forming good financial habits, like the ones mentioned earliest in this article, is the best way to prevent debt from becoming worse and starting on the road to business credit repair.
Paying your bills on time to the best of your ability, managing the ratio of your debt versus your income, and putting money toward an emergency savings fund are also great ways to prevent worsening debt.
Stay organized by being aware of the debt you are accruing and of the debt you have already accrued, this will benefit you in the long run.
Also, know your rights when it comes dealing with collectors and advocate for yourself. There is a big stigma around debt, and some people may feel embarrassed about their personal debt.
Finances are a very personal thing to most people. However, it’s important to remember that you are not alone in dealing with debt. Over half the American population is in some level of debt and there is no shame in reaching out for help.
If the debt feels crushing, or even if you just feel as though you could use some extra help repairing your business credit, enlist the help of a credit repair company to assist you in alleviating your debt and living a life free of financial burden.