Ok, folks…we all know I made my fair share of money mistakes and got myself into some hefty startup debt when I launched my products back in 2004.
And while I never had to declare bankruptcy (not even close), my credit certainly suffered from a skewed income to debt ratio.
Over the years, I’ve slowly built my credit back up but it’s still going to take some time to get it where it once was.
That’s why I was thrilled to see these 5 Steps To Bounce Back from Bad Credit and Bankruptcy over on Business On Main.
5 Steps To Bounce Back from Bad Credit and Bankruptcy
Having bad credit, no credit or a personal bankruptcy filing doesn’t have to put a damper on your business dreams. Learn how you can bounce back.
How much of a handicap is it to start a business with bad credit or no credit, or even after filing for personal bankruptcy? Understandably, startup entrepreneurs and even more established business owners worry about how long hiccups in their personal credit history might weigh down their entrepreneurial potential.
Here’s the good news. While most personal credit scores take a big nose dive after a bankruptcy filing or other financial mishap, they can steadily improve over time. This means that credit-challenged entrepreneurs don’t have to wait 10 years to become creditworthy again. The trick is knowing what to do and when to do it.
Here are five easy credit restoration recommendations for business owners:
1. Obtain a microloan. Business on Main readers know that I’m a fan of microloan organizations. These entrepreneur-friendly lenders, available in all 50 states, tend to be more understanding toward entrepreneurs with no credit history or a bad credit history.
Further, they price their credit products below the rates of most personal credit cards and “professional” small-business credit cards. Loans can be as little as $500, which is a manageable, fast way to turn around a negative credit score. Even better, microloan organizations can increase a borrower’s credit line to keep pace with business progress.
2. Manage credit reports. Bankruptcy laws have changed in recent years. In general, a Chapter 13 bankruptcy filing, which usually involves a repayment plan, can be reported for up to seven years. A Chapter 7 bankruptcy filing can be reported for up to 10 years.
Bankruptcy courts don’t directly report bankruptcy information to credit bureaus. It’s up to the individual to submit information to the three major credit bureaus to correct misrepresentations of a bankruptcy filing, report the successful repayment of Chapter 13 obligations, or remove an item entirely after the reporting term has expired.
3. Minimize the need for debt. Entrepreneurs with bad credit or no credit should favor starting businesses that don’t require sizable up-front cash requirements. For example, it’s much more capital intensive to start up a restaurant than a catering business.
Finish reading the article on Business On Main and then come back here and tell me which credit restoration tip helped you the most. #5 alone would have helped me avoid about $20,000 of debt!
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