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Small Business Owners & Entrepreneurs

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Cal Carpenter

(4,959 posts)
Fri Feb 19, 2016, 01:33 PM Feb 2016

Question about credit cards and credit ratings for business [View all]

So I have a small business. We have one credit card and no other debt (aside from amounts owed to suppliers within all the terms - nothing overdue etc, and no loans).

At the moment we have (let's say) a $10,000 limit on that credit card and a $6,000 balance. I'm wondering if, for long term credit rating purposes, it is better to avoid using the card and chip away at the stale old balance in small amounts (larger than the minimum of course) while paying as many other bills out of our bank account, or is it better to use the card more often and pay it off in bigger chunks with the cash I'm saving throughout the month by using the card? It seems like having the oldest stuff off the card is better, but I don't know if this idea of 'stale' debt vs 'fresh' debt exists outside of my head...

It seems like sort of a wash in terms of cash flow for me, and in terms of the amount of the balance on the card, but I don't know if it is better to use it more frequently or not. I know the general rule of using it at least once a month, and ideally paying off the balance each month. It will get used a little bit every month regardless of this bigger question, and we will be able to get the balance down to zero sometimes (I hope, LOL) but not monthly and not at the moment.

But in the longish run (2 to 3 years), we may want to apply for a business loan or other financing and I'm just wondering if there is a difference between the two methods in terms of building a good credit rating as a business. As I said, we don't have any issues in terms of overdue bills or anything so I think we're off to a good start, several suppliers have given us generous terms and increased credit limits, etc.

I'm just not sure how much of my consumer credit knowledge applies to business credit issues. I also may be overthinking this, as I tend to do, as bookkeeping/accounting is not my forte and it is the most confusing and scary of all the hats I wear at this business.

Any thoughts or ideas would be appreciated.

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