Numbers Game: How Your Credit Score Can Affect Your Startup Financing

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November 9, 2012 ‐ By Ann Brown

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Add your credit score to the list of important numbers — Social Security number, phone number, anniversary — that you should know and keep handy.

In order to get a business loan or a line of credit, you don’t have to have perfect credit. But, writes personal finance expert Michael Germanovsky in Yahoo Small Business Advisor, the better your credit history the better your chances to obtain startup financing.

First, find out what your personal credit score is. “Many emerging entrepreneurs mistakenly believe that by registering a corporation they can obtain a credit by only using their new business tax ID. It is not entirely so. To establish your eligibility, the bank will calculate a credit score by using your personal social security number,” explains Germanovsky. So it is best if you know what that is before hitting the bank.

Your credit, or FICO, score is calculated in various ways. According to FICO, “The FICO Score is calculated from several different pieces of credit data in your credit report…Your FICO Score considers both positive and negative information in your credit report. Late payments will lower your FICO Score, but establishing or re-establishing a good track record of making payments on time will raise your score.”

Banks usually perform these calculations, but you can figure out your score as well for free with MSN.

All is not lost; you can improve credit score, says Germanovsky.

Although your credit score is not the same as the credit rating you received from the credit bureaus — Equifax, Experian, Transunion — your score is affected by your credit history. “While a lender may consider your assets and equity stakes, your debt repayment habits determine not only the size and type of loan or credit extension you may receive, but also the percentage rate as well,” writes Germanovsky.

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