Techniques To Optimize Your Credit Score

Techniques To Optimize Your Credit Score

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Optimize Your Credit Score

Your business credit score is an important factor in determining whether your business will be able to survive in the increasingly competitive financial world. Your credit score not only plays a role in determining the interest rate offered on a loan, but whether or not you will qualify for the loan itself. Regardless of whether your business has stellar credit or is struggling to get by, you could always stand to optimize your credit. Here are a few techniques I have gathered for optimizing your business credit score.

Keep a mixture of credit account types

There are many different credit account types your business has the ability to maintain. These include, but are not limited to, real estate loans, auto loans, equipment loans, credit card loans, etc. While some types have bigger impacts to your credit score than others (i.e. Real estate loans), it is important that you maintain a mixture of different types. This shows potential lenders that your business is capable enough to manage multiple credit accounts. Also, try to limit the amount of loans to each type, such as limiting the number of real estate loans.

Limit inquiries to your credit profile

There are two types of inquiries that a business can impose upon your credit report. A soft inquiry, such as when you check your credit score or when a background check is conducted, does not negatively impact your credit score. However, a hard inquiry, such as when you apply for credit or a loan, does negatively impact your score. You should strive to limit the amount of hard inquiries as much as possible. Lenders do not want to see a history of multiple hard inquiries, since it suggests you have been looking for credit and most likely have not received it.

Keep track of credit utilization ratio

Credit utilization ratio refers to the amount of credit you use on a credit card or credit line vs. the amount available to be used. While most people believe maxing out an available credit line and then paying it shortly would be beneficial to their score, this could not be further from the truth. Maxing out a credit line shows poor credit management and should only be used for emergencies. A major rule of thumb is to keep your credit utilization ratio under 30%, paying down outstanding credit larger than this to this amount can improve your credit score.

Keep old account open

Most people tend to think by closing an account down because it had a late payment can erase it from their credit history. Not only is this not true, but can actually hurt your credit score. The length of time on the accounts of your credit history is a substantial contribution to your credit score. By keeping old accounts open, the account continues to build credit history.

Shelf Corporation

How Much Should They Cost? What Is The Industry Standard?

Aged corporations with no transaction history are priced using this general industry formula:


Cost of Filing + Cost of Maintenance + Years x ($1000)

Example: Bob finds a Nevada aged corporation that is two years old. The aged corporations cost the incorporator $750 to form and to maintain the corporation. How much is it worth?


PRICE = Cost of Corporation + Cost of Maintenance + Years Aged x ($1000)
PRICE = $750 + 2 x ($1000)
PRICE = $2750

$2,750 is the market rate for a two year old Nevada aged corporation. As an alternative, Wyoming aged corporations cost less because their formation and maintenance expenses are substantially less than in Nevada. They are just as good in terms of asset protection and financial privacy, but without the marketing hype. The same corporation formed in Wyoming may only cost $2210.