Business Credit Viewed in Different Light than Personal Credit
Using your personal lines of credit while trying to build business credit can be counter productive. Not only are most personal credit cards tied to a fixed credit limit, they usually are tied to a much larger interest rate than business credit cards without personal guarantee.
Personal credit use is also scored by more than just its repayment history. Every time you make an inquiry for additional credit in your personal name your credit score actually decreases, so shopping for price and terms will eventually limit what you can obtain in your personal name. When an incorporated business shops or has its credit history checked by a potential lender, this inquiry history is not even considered.
The loan to value portion of the credit granting equation also disappears when building business credit as this ratio is not longer part of the risk factor, since you are investing the borrowed money in business transactions. For very large amounts, your business plan may be more important to the lender than your repayment schedule.
As a personal borrower your credit could easily become a liability for them. That picture of you changes when you apply for business credit cards without personal guarantee. As a business borrower you are an asset and a partner in their growth as well. With Corp., INC. or LLC after your business name, lending institutions see your business as the person they are lending to and you become a representative.
