Reasons Why You Shouldn’t Mix Business and Personal Credit

April 18th 2018 at 12:29pm Published by sharpshooteradmin

For innumerable reasons, you should avoid mixing your business credit with your personal credit. There is a reason why you have the option to keep your business credit profile separate from the personal credit profile. Mixing the two wouldn’t just make it hard for you to report the progress you’re making as a business but would also stop you from doing functions that are generally expected out of all businesses.

While we have spoken a lot about not mixing your personal finances with your business finances, we believe the same also goes about your credit. Business credit should be operated separately from personal credit, and you shouldn’t mix the two at all.

Here we mention just a few reasons why you should stay safe from committing this cardinal sin:

You Don’t Build Your Credit Profile

Your business credit profile is heavily dependent on the kind of credit you have used as a business. If you haven’t used credit for your business, then there is no way that you can think of growing as a business. Once you go and apply for credit for your business, you would realize that you don’t have a credit history and that no funder is willing to trust you.

Most business owners think it is okay to get funding from their personal credit for the business. That funding is recorded in the business credit books and they think their job here is done. However, the credit profile and the credit score you get for your business is completely neglected.

When they actually do go on to get small business funding from a private funder, they realize how they have been unfair with their business by not providing it with a chance to build the credit profile at all.

Poor Personal Credit Score

A poor personal credit score is another repercussion of mixing both business and personal credit. Imagine you have taken a debt for business use from your own credit limit. Not only would you be increasing your credit utilization ratio, which is a big part of computing the total credit score, but would also be risking poor repayment. If your business is unable to repay the funding at the right time, you would suffer from poor repayment, which is the other biggest head for computing your credit score.

Makes Accounting Problematic

Mixing your personal finances or personal credit with the records for your business can really make accounting and bookkeeping problematic. You would want your accounting to be smooth, so that you can present the records in front of any stakeholder or authority when the time comes. Once your accounting suffers from dubiousness, it is hard to assure stakeholders and regain trust.