Using a Corporation to Improve Your Credit Score

llc, credit, corporationLast week I traveled to Austin Texas in search of some single-family homes.  I am specifically looking for VA foreclosures because of the special financing terms and 5% down offered by Bank of America.  The purpose of this post is not my investments but rather my pre-qualification experience.

Two weeks before my search began, I contacted Bank of America to obtain pre-qualification so I could place a few offers if I felt so inclined.  During this process, the specialist with whom I was working noted, with some amazement, after pulling my credit that I only have one credit card.  I asked why this was of particular interest and she stated that most individuals have at least 3 credit cards if not more. 

I informed her that I do in fact have 3 credit cards but only 1 is in my personal name.  The other two cards are in the name of my business.  Many of the people with whom I work have purchased some education, at considerable cost, to teach them the ins and outs of investing.  These expenses are charged to a personal card unless the customer has an existing business card.  Hence, the personal credit will take a hit and remain so until the card balance is paid.

Ideally, people who attend a workshop should already be in business but the reality is most are looking to escape from their job and become self-sufficient.  Therefore, starting a business should be high on the investors priority list to capture deductions and improve their credit profile, as I am about to outline.  From a pursuing of my blog you know I recommend the use of a corporation or limited liability company for investing.  What you may not know is a business can provide more than asset protection and tax planning benefits, if properly structured and optimized, it can help you increase your credit score by eliminating your personal credit card debt.  This can be accomplished with 3 easy steps:

Step 1 – Start a corporation or limited liability company
Step 2 – Apply for a new credit card in the name of your business  (Only use a company that does not report to your personal profile)
Step 3 – Transfer your balance over to the new card thereby freeing up your personal credit.  (Remember, the balance you transfer should be related to your business e.g., education, travel for workshops, ect., and not personal credit debt.) 

Corporations or limited liability companies can help you improve your credit profile by deceasing your personal credit debt, and is one of numerous reasons why you should consider setting up your business now versus later.

If you would like more information on banks that offer business credit cards that do not report to your personal credit contact Dan Olman at our Las Vegas office at 702.487.3781

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