MSU Extension Product Center

Hello. My name is Tanya Williams and I am a financial educator here with MSU Federal Credit Union. And my pronouns are she and her. Welcome back to our three part series on entrepreneurship. We're going to be here with entrepreneurship phase two, Growth Basics. What is that going to look like for us? That is going to look like the differences between personal credit and business credit. We're also going to discuss the similarities between personal credit and business credit. We're going to talk about maintaining credit in addition to growing with credit. What is credit? I'm sure many of you probably are very familiar with what credit is, but if not, we're going to cover it anyways. And if you are, then we can consider this a pressure credit is a contract agreement in which a borrower receives a sum of money or something of value and repays the lender at a later date. Generally with interest assessed. What this means is we're going to talk about a credit report and a credit score. Ultimately, the two work together. Our credit report influences our credit score and our credit score. And our credit score circles back to what is on the report. Ultimately, we're going to talk about those two different things. But ultimately, a credit report gives you in detail what lines of credit or trade lines you may have under your social security number or your business number and how well you've handled those debts. If you haven't handled those debts very well then odds are you might have a lower credit score then you would like to see if you have handled those things well, then your credit score will be higher. Which overall, either way, can impact your business and the growth of your business. What is not on a credit report, which is very important, race is not on a credit report. Religion, your sex, your marital status, and your income. Now with that being said, those things may be asked of you as you're applying to a new financial institution. Or you may have to do some level of verification with income to move forward in the lending process. However, when we are talking about a credit report, these things not on that report. One thing in particular, if you can take the moment to pause this video, then here's the time to do this. As your reminder, you want to make sure that you conduct a credit check up. And what does this mean? This means that we are contacting our Consumer Credit Bureaus and our business credit bureaus. Our Consumer Credit Bureau, which many people are very familiar with, are Experian, Transunion, and Equifax. And you can get your credit report for free at annual Credit Report.com from all three reporting bureaus. With that being said, I do believe you get that for free one time per year for all three. What this could look like is maybe you check your credit report quarterly by utilizing a different credit bureau that you're going to be pulling that from. The reason that this is important is not all businesses report to every credit bureau. There may be things on your Experian report that you might not see on your Trans Union report and so on and so forth. Then our business credit bureaus are Experian business, another name familiar there. Equifax business, again, another familiar name. And then done in Bradstreet, which is specifically for businesses which not a lot of people are familiar with. If you're new to business consumer credit versus business credit. Consumer credit reports express how individuals have credit in the past and are only available to lenders upon legal and legitimate reasons. We will get into hard pull versus soft pull and what that looks like, but ultimately, this is only available to your lenders. And if you're really going through different legal and legitimate processes, then we have the Business Credit Reports. This shows information related to a company's finances, the ownership of the company, and the use of credit as the company. And they are publicly available and must be purchased. Ultimately, anybody could publicly purchase the credit report for your business. When we're talking about this, this is why some news outlets can find credit reports about businesses because they are publicly available for purchase. What is on a consumer credit report? It's important to know that there are four areas in which we talk about when we talk about credit reports. If you were with us for one of our first series on start up basics, this slide might look a little similar as our business plan, right? There are key sections of information on specific reports or plans or things of that nature. This looks a little familiar, hopefully what we're talking about on our consumer credit report is going to be identifying information, credit information, inquiries, and public records. Identifying information is basically that it tells who this report belongs to. It should have your name, your address, your date of birth, and your Social Security number on there. With that being said, you might also see phone numbers before current and past phone numbers. Current and previous employers in addition to Co applicants that may have been on a loan with you and previous and current addresses. All this information is pulled and all that information is pulled during applications or requested during applications. You may see it, you may not. But those are some of the identifying information you should see on a consumer credit report. Then we're going to talk about credit information. What are the things that are on a credit report? Credit information, this includes your student loans. This includes credit cards, regular loans, whether that be secured or unsecured loans. Charge offs and collections. So what is a charge off? A charge off is where you might owe a bank money and when you're not actually paying that money, especially if you have a loan that doesn't have collateral attached to it. Let's say instead of a vehicle loan, you took out a personal loan to start your business. Well, the credit union, but a financial institution isn't going to come, just take possession of your business. What they will do is they'll charge it off and say that it's a loss and then send that to a collection company. And then the collection company are the people who will reach out to you to try to resolve the debt for a lender or a financial institution. And then we talk about inquiries. There's hard and soft inquiries. A lot of times people call them hard or soft pulls. A hard pull is done for legitimate business purposes. This means that you are applying to have some level of credit, which could be a credit card alone. It could be for purchasing a house. It could be for store cards. This is where people really want to see the solid information as it stands as of today's date. A soft inquiry or soft pull, it can be done by employers, it can be done by your insurance company. And the soft pulls can determine, it can determine what your insurance rate will be. It can be done by you. It can also be done by housing management company. So if you're looking to rent a home, they want to know how well do you handle your debts and your money. And those are generally soft pulls. And basically all that means is you're not applying for credit. But we do need to see what's on there if you are getting offers in the mail for a credit card. These are from soft polls, where we see an overall collection of how things have been going, but we're not getting that solid data for that specific date, right? Those are the differences between your hard and soft pull. Then we have public records, bankruptcies, and foreclosures. This is where you go through more of a court system or legal process to dispatch a debt, like with a bankruptcy, or if it goes through foreclosure, that's a whole other process. These are what you would see on your credit report. Now let's talk about our business credit report. The three business credit bureaus, Equifax, Experian, Dun, and Bradstreet, generate business credit scores from the above listed information. As does Fico. Unlike consumer credit scores which use standard methods and algorithms for scoring each of the business credit bureaus use completely different methods for scoring business credit risk with different score ranges. That's important to know. Just just keep that in mind as you're going through and potentially purchasing your business credit report from those different areas. As you can see five sections here. We have the business profile, we have the trade line, payment history, commercial financial history, public filings and risk scores. Business profile includes a summary of your business, right? This is reviewed as your business legal name and address, and phone number incorporation details that can look different whether you are a corporation, an LLC, or something of that nature, your business type. We also have a number of employees and years in operations and subsidiaries. This is what your business profile will look like. Again, this might. A bit smaller depending on where you're at in your business. And that's always important to remember. If you're just getting started and you're really wanting to establish credit under a business, then these things might look completely different. Things might look completely different as compared to somebody who could be ten years in business, right? Again, same thing with your personal credit report as well. If you're just establishing personal credit, your credit report might look completely different from somebody who established credit in numerous different ways ten years ago. That's important to keep in mind. Then we have our trade line payment history. Basically, this section reflects your company's payments over the course of three years, including payments made to vendors. If you have not only opened up maybe a credit card within your business, a trade line, also you might be getting credit from vendors based upon your business number. This is where that's going to show up. Again, making sure that those payments are on time is going to be really important to keeping a positive a credit report. Then we have commercial financial histories and this shows your payment history to creditors, lenders and insurers, business loans, lines of credit, equipment, leases and insurance policy payments will also show here. Then we have public filings, and this is where derogatory information is housed, including bankruptcies, judgments, liens, and collection account information. As you can see, there's a lot of similarities between our personal credit report and our business credit report. Yes, there's going to be some differences there, but ultimately it all says the same thing, right? How well do you handle debt And are you great at handling debt? Do you pay your debts back in a timely manner or do you make a lot of late payments or maybe you don't pay that back at all? Right, That's ultimately what our credit report is. Then we also have our risk scores. And this can include some or most of these depending on the credit reporting agency the report is being pulled from. This can be your credit risk score, your failure score, your pay Tex delinquency, You're done in Bradstreet rating and your viability rating. How viable is the business based upon what information they've been able to gather? Hello. My name is Tanya Williams and I am a financial educator here with MSU Federal Credit Union. And my pronouns are she and her. Welcome back to our three part series on entrepreneurship. We're going to be here with entrepreneurship phase two, Growth Basics. What is that going to look like for us? That is going to look like the differences between personal credit and business credit. We're also going to discuss the similarities between personal credit and business credit. We're going to talk about maintaining credit in addition to growing with credit. What is credit? I'm sure many of you probably are very familiar with what credit is, but if not, we're going to cover it anyways. And if you are, then we can consider this a pressure credit is a contract agreement in which a borrower receives a sum of money or something of value and repays the lender at a later date. Generally with interest assessed. What this means is we're going to talk about a credit report and a credit score. Ultimately, the two work together. Our credit report influences our credit score and our credit score. And our credit score circles back to what is on the report. Ultimately, we're going to talk about those two different things. But ultimately, a credit report gives you in detail what lines of credit or trade lines you may have under your social security number or your business number and how well you've handled those debts. If you haven't handled those debts very well then odds are you might have a lower credit score then you would like to see if you have handled those things well, then your credit score will be higher. Which overall, either way, can impact your business and the growth of your business. What is not on a credit report, which is very important, race is not on a credit report. Religion, your sex, your marital status, and your income. Now with that being said, those things may be asked of you as you're applying to a new financial institution. Or you may have to do some level of verification with income to move forward in the lending process. However, when we are talking about a credit report, these things not on that report. One thing in particular, if you can take the moment to pause this video, then here's the time to do this. As your reminder, you want to make sure that you conduct a credit check up. And what does this mean? This means that we are contacting our Consumer Credit Bureaus and our business credit bureaus. Our Consumer Credit Bureau, which many people are very familiar with, are Experian, Transunion, and Equifax. And you can get your credit report for free at annual Credit Report.com from all three reporting bureaus. With that being said, I do believe you get that for free one time per year for all three. What this could look like is maybe you check your credit report quarterly by utilizing a different credit bureau that you're going to be pulling that from. The reason that this is important is not all businesses report to every credit bureau. There may be things on your Experian report that you might not see on your Trans Union report and so on and so forth. Then our business credit bureaus are Experian business, another name familiar there. Equifax business, again, another familiar name. And then done in Bradstreet, which is specifically for businesses which not a lot of people are familiar with. If you're new to business consumer credit versus business credit. Consumer credit reports express how individuals have credit in the past and are only available to lenders upon legal and legitimate reasons. We will get into hard pull versus soft pull and what that looks like, but ultimately, this is only available to your lenders. And if you're really going through different legal and legitimate processes, then we have the Business Credit Reports. This shows information related to a company's finances, the ownership of the company, and the use of credit as the company. And they are publicly available and must be purchased. Ultimately, anybody could publicly purchase the credit report for your business. When we're talking about this, this is why some news outlets can find credit reports about businesses because they are publicly available for purchase. What is on a consumer credit report? It's important to know that there are four areas in which we talk about when we talk about credit reports. If you were with us for one of our first series on start up basics, this slide might look a little similar as our business plan, right? There are key sections of information on specific reports or plans or things of that nature. This looks a little familiar, hopefully what we're talking about on our consumer credit report is going to be identifying information, credit information, inquiries, and public records. Identifying information is basically that it tells who this report belongs to. It should have your name, your address, your date of birth, and your Social Security number on there. With that being said, you might also see phone numbers before current and past phone numbers. Current and previous employers in addition to Co applicants that may have been on a loan with you and previous and current addresses. All this information is pulled and all that information is pulled during applications or requested during applications. You may see it, you may not. But those are some of the identifying information you should see on a consumer credit report. Then we're going to talk about credit information. What are the things that are on a credit report? Credit information, this includes your student loans. This includes credit cards, regular loans, whether that be secured or unsecured loans. Charge offs and collections. So what is a charge off? A charge off is where you might owe a bank money and when you're not actually paying that money, especially if you have a loan that doesn't have collateral attached to it. Let's say instead of a vehicle loan, you took out a personal loan to start your business. Well, the credit union, but a financial institution isn't going to come, just take possession of your business. What they will do is they'll charge it off and say that it's a loss and then send that to a collection company. And then the collection company are the people who will reach out to you to try to resolve the debt for a lender or a financial institution. And then we talk about inquiries. There's hard and soft inquiries. A lot of times people call them hard or soft pulls. A hard pull is done for legitimate business purposes. This means that you are applying to have some level of credit, which could be a credit card alone. It could be for purchasing a house. It could be for store cards. This is where people really want to see the solid information as it stands as of today's date. A soft inquiry or soft pull, it can be done by employers, it can be done by your insurance company. And the soft pulls can determine, it can determine what your insurance rate will be. It can be done by you. It can also be done by housing management company. So if you're looking to rent a home, they want to know how well do you handle your debts and your money. And those are generally soft pulls. And basically all that means is you're not applying for credit. But we do need to see what's on there if you are getting offers in the mail for a credit card. These are from soft polls, where we see an overall collection of how things have been going, but we're not getting that solid data for that specific date, right? Those are the differences between your hard and soft pull. Then we have public records, bankruptcies, and foreclosures. This is where you go through more of a court system or legal process to dispatch a debt, like with a bankruptcy, or if it goes through foreclosure, that's a whole other process. These are what you would see on your credit report. Now let's talk about our business credit report. The three business credit bureaus, Equifax, Experian, Dun, and Bradstreet, generate business credit scores from the above listed information. As does Fico. Unlike consumer credit scores which use standard methods and algorithms for scoring each of the business credit bureaus use completely different methods for scoring business credit risk with different score ranges. That's important to know. Just just keep that in mind as you're going through and potentially purchasing your business credit report from those different areas. As you can see five sections here. We have the business profile, we have the trade line, payment history, commercial financial history, public filings and risk scores. Business profile includes a summary of your business, right? This is reviewed as your business legal name and address, and phone number incorporation details that can look different whether you are a corporation, an LLC, or something of that nature, your business type. We also have a number of employees and years in operations and subsidiaries. This is what your business profile will look like. Again, this might. A bit smaller depending on where you're at in your business. And that's always important to remember. If you're just getting started and you're really wanting to establish credit under a business, then these things might look completely different. Things might look completely different as compared to somebody who could be ten years in business, right? Again, same thing with your personal credit report as well. If you're just establishing personal credit, your credit report might look completely different from somebody who established credit in numerous different ways ten years ago. That's important to keep in mind. Then we have our trade line payment history. Basically, this section reflects your company's payments over the course of three years, including payments made to vendors. If you have not only opened up maybe a credit card within your business, a trade line, also you might be getting credit from vendors based upon your business number. This is where that's going to show up. Again, making sure that those payments are on time is going to be really important to keeping a positive a credit report. Then we have commercial financial histories and this shows your payment history to creditors, lenders and insurers, business loans, lines of credit, equipment, leases and insurance policy payments will also show here. Then we have public filings, and this is where derogatory information is housed, including bankruptcies, judgments, liens, and collection account information. As you can see, there's a lot of similarities between our personal credit report and our business credit report. Yes, there's going to be some differences there, but ultimately it all says the same thing, right? How well do you handle debt And are you great at handling debt? Do you pay your debts back in a timely manner or do you make a lot of late payments or maybe you don't pay that back at all? Right, That's ultimately what our credit report is. Then we also have our risk scores. And this can include some or most of these depending on the credit reporting agency the report is being pulled from. This can be your credit risk score, your failure score, your pay Tex delinquency, You're done in Bradstreet rating and your viability rating. How viable is the business based upon what information they've been able to gather?