We all know there's a healthy hacker culture in the entrepreneurial world. For decades, coders have hacked their way to creating new products and businesses.
Recently, I've started hearing about folks concerned about their financial well-being who want to hack their credit scores. I've met a few younger entrepreneurs who either have bad credit or haven't established credit yet and want to do it the right way. You may not know it, but your credit situation has a powerful effect on your business opportunities and aspirations.
With 2018 just around the corner, let's take a look at specific steps you can make to improve your credit, or get it started right, so you can strengthen your business too.
1. Become an authorized user on someone's credit card.
If you don't have credit yet and need to establish it, this is for you. You need credit to qualify for a business loan, get a company credit card, or purchase big-ticket items like company vehicles or office equipment.
When you become an authorized user on someone else's card, you increase the odds of getting your own card in the future. You also share responsibility and liability for that credit card account. It's a fairly quick way to change your credit score--you'll be able to make purchases and payments to illustrate your credit maturity.
One important note: Not every credit card company reports all authorized users. Make sure you'll be able to capitalize on this arrangement before you become an authorized user.
2. Get a free credit report.
You have to actually find out what your credit score is in order to make improvements. It's free, so you might as well do it. The Federal government states everyone is entitled to one free credit report every 12 months.
This helps you see where you stand in terms of ranking--and what improvements need to be made to increase that score. It also gives you the opportunity to check for errors on your credit report, so they can be corrected.
3. Open a secured card and pay it back on time.
Let's say you have a pretty rough credit history and it's preventing you from paying for business services and freelancers.
When you open a secured card, you're required to give the credit card company a deposit, which they hold as collateral. In return, they issue you a secured credit card that has very limited credit but provides a sensible way to prove you're capable of borrowing money and paying it back on time each month.
Since the two most impactful ways to raise your credit score are credit use and on-time payments, this is hugely beneficial. Major credit cards now offer secured cards, which means you'll be able to work with recognizable and trustworthy brands.
4. Apply for a store card.
Dozens of companies offer their own versions of credit cards, and special product deals to go along with them.
These retailer-branded cards can be particularly valuable if you're looking to save on items for the office, and the banks behind them have generally agreed to work with those who have lower credit scores.
It's one of the better first steps toward re-establishing good credit. Just be careful with a store card--they'll continually entice you to spend money by offering special deals, promotions, and coupons. Resist temptation so you can improve your credit rather than put yourself back in a tight financial spot.
5. Ask for a credit limit increase.
Once you've established some history of paying back your debt, your credit card company may be willing to increase your limit. This can boost your credit usage ratio automatically, which can help your score go up. If the credit limit is approved, it's best not to spend it right away.
One important note: Make sure the bank doesn't do a "hard inquiry" on your credit when you ask for a limit increase. It can shave points off your credit score, defeating the purpose of your request, and can stay on your credit report for up to two years.
Lastly, continue to focus on making sound buying decisions for your business. Avoid frivolous expenses that aren't vital to the company. Be patient and focus on saving your money rather than spending.
You'll find that before 2018 is over, you'll have hacked your credit worthiness--and improved the health of your business.