Personal Credit Score – the impact it has on your business
We have heard and read about the data breach at Equifax, and the potential impact it could have on every single one of us as an individual. I don’t recall seeing an article about what impact it has on us that are Business Owners.
Personal credit scores are an integral part of an entrepreneur’s risk assessment. It does not matter if you are a startup or have been in business for 100 years, many organizational institutions check your personal credit score when they underwrite an insurance policy, line of credit, loan or any derivative thereof.
Simply put; One needs credit and good credit history to obtain a slew of products that you require to operate your business. Such includes to name a few, Lines of Credit, Installment Sales Agreements, Loans, Insurance (automobile, liability, comprehensive, etc.) credit card processing.
As we all know, credit scores are used to rate your creditworthiness. The lower the score, the less likely you are to be granted favorable terms on any of the abovementioned instruments. If you are perceived as a high risk, expect to pay high premiums/interest, etc.
What’s frustrating to most of us, is we go to extreme measures to protect our personal details and as experienced in the last few weeks our personal information – which we have no control over – gets stolen and could compromise not only us personally but also our business, and all the employees that we employ.
In recent months, I have dealt with two or three clients that have tax liens imposed on them by the IRS. I have referred them to competent professionals that have negotiated and placed palatable payment plans -Offer in Compromise - in place with the IRS. Yet they battle to obtain, working capital to aid them in their fiscal woes. Why do you ask? The IRS shares information with the credit monitoring agencies and this will appear on your credit report, significantly lowering your credit score. What is important to know, even if you have successfully negotiated an Offer in Compromise with the IRS or paid off your tax debt, your tax lien reference will remain on your credit report and impact your credit score for seven years.
What’s explicitly clear, is we cannot control all the elements, around us, but what we can control we should do with the highest diligence. In numerous instances, our business is the sole form of livelihood, we need to be diligent and protect ourselves.