Used wisely, credit can be a profitable friend; used carelessly, it can be a destructive enemy. Following are nine ways to help put credit to work for you and your skin care facility— not against you.
- Be aware of your credit report. If your credit score is good, it will be easy for you to get credit when you need it. If your score is bad, you may find it impossible to get credit from anyone. To learn more about how your credit score is calculated, check out the Federal Trade Commission’s information site at www.ftc.gov/bcp/menus/consumer/credit/reports.shtm.
- Improve your credit score. You can improve your score by paying your bills on time and avoiding closing out accounts and transferring balances to other credit cards.
- Avoid the minimum-payment trap. If you make only minimum payments on a significant balance, it can take years—sometimes decades—to pay off the full debt.
- Don’t cancel unused credit card accounts all at once. If you have multiple business credit cards, but use only a few of them, it’s best to close out the unused ones. However, be sure to keep the cards that you’ve had the longest and cancel the newest cards. The credit reporting agencies like to see a long record of prompt payments. Too many new cards tends to lower your credit score.
- Think twice before opening new credit card accounts or credit lines. If you and your business don’t already have a long and favorable credit history, opening a new credit line tends to lower your score. New accounts lower the average age of your accounts, affecting your credit score.
- Consolidating credit card balances is not a cure. Debt consolidation may sound like an easy cure, but many business owners have discovered that so-called debt consolidation led them down the road to an even more burdensome debt load.
- Eliminate pre-approved credit card offers. Pre-approved credit offers in your mailbox represent a temptation for identity thieves who might try to open new credit accounts in the name of your business. You can opt-out by visiting the official Credit Reporting Industry website at www.optoutprescreen.com/?rf=t or by calling 888-567-8688.
- Be aware of the differences between debit cards and credit cards. Although you get protection from liability due to fraud on both credit card and debit card purchases, debit cards do not offer the same protection as credit cards in the case of defective or unsatisfactory merchandise. With credit cards, you may dispute errors or unauthorized charges and withhold payment until the matter is resolved. With a debit card, your money is spent the moment you complete the transaction.
- Never co-mingle business and personal funds. Not only is mixing your business and personal finances together an open invitation to problems with the Internal Revenue Service (IRS), it complicates your record keeping and cash flow management. You should maintain separate business bank accounts and make all of your business credit purchases on separate accounts.
Some experts compare unwise use of credit to drug use. It can offer short-term pleasure in exchange for long-term pain. Once the credit monster gets his hooks in you, it can be painfully difficult—and sometimes impossible—to free yourself. Credit in itself is not harmful; used skillfully it can be a profitable tool for managing your business affairs. Use these tips to help make credit one of your business assets, not one of your liabilities.
William J. Lynott is a veteran freelance writer who specializes in business management, as well as personal and business finance. His work appears regularly in leading trade publications and newspapers, in addition to consumer magazines such as Reader’s Digest, AARP Bulletin and Family Circle. He can be contacted via e-mail at firstname.lastname@example.org.