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5 Common myths that may be affecting your business credit score

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Your business credit score is critical

Balboa Capital, a leading independent financing company that specializes in equipment leasing and small business loans, announced the results of its mid-2014 small business survey that was sent to over 450,000 small business owners and more than 35,000 equipment dealers throughout the United States. The July survey reveals that concerns about the US economy have decreased and that small business owners and equipment dealers plan to invest in their operations during Q3 and Q4.

That’s great news, but what are these companies doing to help or hurt their credit score so they can actually make those investments?

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Balboa Capital has offered the following commentary, outlining the five common myths they say could be affecting your business credit score:

Not everyone understand how business credit works

As we all know, a good credit score is one of the most important aspects of financial stability. Lenders, landlords, insurers, and utility companies all examine this rating; therefore, failing to maintain a good credit score could put a strain on one’s financials. With so many misconceptions surrounding what helps or hurts a credit score, it can be difficult to separate fact from myth.

Even the most well-informed consumers do not fully understand how credit scores work and may still believe in some of the most common myths about them. The following guide will help clear up some of these credit score myths and provide tips to keeping your score in the best shape possible.

Myth 1: Checking your credit hurts your credit score

One of the most common beliefs about credit scores is that checking your own credit will lower your credit score. Fortunately, requesting a copy of your own credit report will not have an effect on your credit score. Your credit score is only impacted when the credit check is made for credit cards or loans.

This myth can be very dangerous to your credit score as it discourages you from monitoring your credit report. It is important to review your credit report periodically to identify and address any inaccuracies. Keeping an eye on your credit report will allow you to confirm that your payment performance is accurate and will enable you to remove any accounts that are falsely reported. Errors on your credit report can put a damper on your credit score and impact how lenders evaluate your credit worthiness.

Myth 2: Paying your bills on time is all that’s necessary to keep a good credit score

Many consumers believe that all they must do to keep a strong FICO score is pay their bills on time, but there is more to a good credit score than just a good payment history. Paying your bills on time accounts for just 35% of your credit score. The other 65% is comprised of the amount owed (30%), length of credit history (15%), new credit (10%) and type of credit (10%). It is important to take all of these components into account when reviewing your credit profile.

It is also important to note that your credit score is impacted by both positive and negative information on your credit profile. Late payments will have a negative effect on your score; however, if you improve your payment habits and consistently pay on time, you may see an increase in your credit score.

Myth 3: Lowing your credit limits helps your credit score

Asking your lenders for lower limits does not necessarily improve your credit score. In fact, maintaining substantial credit limits can actually help your score so long as you do not run up the debt to the maximum limit. When reviewing your credit profile, most lenders look for a fairly wide gap between the limit available and the actual amount of credit you are using.

As you know, your FICO score is based on a number of calculations. How much debt you owe makes up 30% of your score and can be calculated using your debt-to-available credit ratio. Debt is how much money you owe on all your credit cards, and the available credit is the sum of all the credit lines that are open. The lower your debt-to-available credit ratio the better your score. Therefore, if you reduce your credit limits but maintain the same debt, your debt-to-credit ratio will increase and can reflect negatively on your credit score.

For example, if you have $3,000 debt on your credit card with a limit of $10,000, you’re debt-to-available credit ratio is 30%. If you were to lower your credit limit to $7,500, you’re debt-to-available credit ratio

Myth 4: Closing a credit account can help your credit score

Closing credit cards does not help your credit rating. In fact, when you close an account your credit score may take a hit. Because the length of your credit history makes up roughly 15% of your FICO score, closing a credit card with a long payment history could be detrimental to your score.

If you stop using one of your oldest credit cards over a period of time, the card issuer may stop reporting updates on the account to the credit bureaus or close the account altogether. Even if the account still appears on your credit report, this long-standing credit account will not positively impact your score as much as it would if it were actively being used. The longer your credit history, the better. So it may be good for your score to keep an older account open and use the card at least once a month.

If you feel you must close an account, it is better to close the most recently opened cards first. For example, if you recently opened up a credit card to receive a discount, this would be the account to consider closing first.

Myth 5: Opening many credit cards is good for my credit score

Very often, many consumers believe having several active credit cards help improve their FICO score. However, the truth behind this myth depends on a number of factors. Depending on your overall credit history, opening several credit card accounts can actually hurt your credit score. For instance, having several credit cards with either high balances or high credit limits can have a negative effect on your credit score.

Regardless of the number of credit cards you have, whether 5 or 25, maintaining high balances can hurt your FICO score. To lenders, having high balances on credit cards indicates you may be a higher risk and this can impact whether credit is extended to you. Furthermore, having high debt-to-credit ratios on your open credit accounts will not help your credit score either. Overall, opening too many credit cards only affects your credit score if you don’t handle them properly.

The American Genius is news, insights, tools, and inspiration for business owners and professionals. AG condenses information on technology, business, social media, startups, economics and more, so you don’t have to.

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Business Finance

20 states won’t grant or renew a professional license if your student loans default

(FINANCE) If your student loans default, your professional license may be revoked – a hard blow to medical practitioners, Realtors, delivery drivers, and so many more hard working people.

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Student loans represent a significant financial burden for recent graduates, with average loan debt in 2017 hitting $37,172, and the impact of debt repayment at graduation causes many Americans, mainly younger professionals, to delay everything from traveling the world and marriage, and even opening their own business.

Beyond the burden of debt, student loans are particularly tricky because they play by some different rules.

Most debt for example, doesn’t accrue interest while you don’t make any payments, and the flexibility of the repayment options can put borrowers in difficult situations where they don’t recognize their repayment amount. In addition, because the way we relate to the lender (AKA the federal government), the consequences of student loan debt often makes it seem less important to pay.

However, most of that flexibility is limited to non-private student loans. Private student loans have all the troubles of regular loans, with some added bite.

One way that student loan debt is different from other forms of consumer debt is that not even bankruptcy can clear you.

In 1976, Congress passed a law that put public student loan debt in a separate category that can’t be discharged. In 2005, Congress extended that to private student loans.

Not paying your student loans can lead also lead to wage garnishment and tax refund seizure.

But perhaps the most painful and insulting consequence of student loan default can be the withholding of your professional (or even your driving) licenses. If you’re a barber, nurse, teacher, lawyer, psychologist, realtor or need to drive a car, that can be devastating.

NYT uncovered that the following 20 states that allow this include:

  1. Alaska
  2. Arkansas
  3. California
  4. Florida
  5. Georgia
  6. Hawaii
  7. Illinois
  8. Iowa
  9. Kentucky
  10. Louisiana
  11. Massachusetts
  12. Minnesota
  13. Mississippi
  14. New Mexico
  15. North Dakota
  16. South Dakota
  17. Tennessee
  18. Texas
  19. Virginia
  20. Washington

Beyond the damage to credit scores, liens on properties, and the financial consequences, these license seizures can represent financial ruin, and can punish well-meaning borrowers and those who are working on public service loan forgiveness as well.

The most important thing you can do is know your options.

If you have public loans, explore repayment options, explore refinancing with direct loans, and most importantly, communicate with your lender. If you have private loans, consider moving that debt into something more manageable, especially since private loans have no interest cap, a personal loan or a home equity loan can be a more affordable option.

The best way to handle default is to avoid it – and don’t drown by avoiding swimming. Most importantly, get in the know, explore your options, and get talking. And if you’re feeling extra motivated, work with your state representatives and work on getting legislation to help make students loan more manageable.

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Business Finance

How to invest in any cryptocurrency without the IRS hunting you down

(FINANCE) Paying taxes on your cryptocurrency investments doesn’t have to be a headache with this simple tool.

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The next tax season will inevitably approach, and those of you who took a chance on cryptocurrency may be wondering: Do I have to pay tax on my digital investments? Sorry, but yes you do.

Although tax laws are constantly changing, especially in the wild west of cryptocurrency, fear not. Token Tax is the one tool to rule them all, and can help you report cryptocurrency taxes.

In this past year, cryptocurrency investment has skyrocketed. The total market cap rose over 1000 percent, even breaking a record and climbing over $600 billion in December.

Coinbase, the most popular online platform for buying and selling digital currency, gained one million users in one month alone.

Cyrptocurrency’s increasing popularity led to changes in IRS rules.

Although cryptocurrency investors were previously able to use the “like-kind” tax code exemption, the IRS now says digital investments must be taxed as short and long-term capital gains.

Back in 2015, only 802 Americans reported Bitcoin related gains and losses. At the time, cryptocurrency could technically be categorized a property instead of income. The 2017-18 year should show a greater increase in reports due to the new IRS regulations.

It can be difficult to determine how to report your taxes, and many other available tools victimize you with information overload. Understanding your tax liability is no fun at all, but it’s not something you’d want to get wrong unless tax jail sounds exciting.

The newly minted Token Tax does the work for you, integrating directly with Coinbase’s API to import all your investments in an easy to read format that’s directly exportable to the IRS. Kraken, Bittrex, and GDAX are also securely integrated with the platform.

Using FIFO, Token Tax calculates your tax liability and displays it in an easy to read interface. You can then export a fill-out 8949 form directly to your accountant or the IRS for review.

Creators Alex Miles and David Holland Lee say they believe Token tax “could be the TurboTax for crypto.”

Even though Token Tax is still in test mode, not even beta, it caught our attention by winning first place overall in Product Hunt’s Global Hackathon.

If you have invested in cryptocurrency and want to get ahead of the curve for tax season, check out their demo and see for yourself.

This story was first featured here in January of 2018.

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Business Finance

First impressions matter – how to win over investors immediately

(BUSINESS FINANCE) Impressing investors is nerve-wracking, but these tips can help you to nail your first impression.

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Going in for your first pitch meeting with investors can be nerve wracking—especially if you haven’t yet met these investors in person. Fortunately, if you land a solid first impression, you can set the right tone for the meeting, and make the rest of the presentation a little easier on yourself.

But why are first impressions so important, and how can you ensure you make one?

Let’s start with a recap of the benefits of a strong first impression:

  • A reputation framework. Our brains are wired to make quick judgments about our surroundings. Accordingly, we tend to judge people based on our first interactions with them, with little opportunity to change those initial judgments later on. If you strike investors as a smart, likeable, and capable person early on, they’ll see your pitch deck in a whole new light.
  • Memorability. First impressions stick with people. If yours stands out from the other entrepreneurs pitching these investors, they’ll be more likely to remember you, specifically, and therefore may be more likely to eventually fund your project.
  • Personal confidence. If you know you’ve nailed the first impression, you’ll feel more confident, and as you already likely know, confidence makes you a better public speaker. You’ll speak more deliberately, more passionately, and with fewer mistakes.

So how can you make sure you land this impression?

  • Arrive in a nice vehicle. Show up in a luxury vehicle, or at least one that’s been recently detailed, sends a message that you’re already successful. This isn’t a strict necessity, but it can speak volumes about what you’ve already achieved, and how you might look when you drive to meet your future clients.
  • Dress for the occasion. Along similar lines, you’ll want to dress nicely. You don’t need to have ridiculously expensive clothes, but you should wear standard business attire that fits you properly and has no signs of wear. It’s also a good idea to get a haircut, shave, wear tasteful makeup, and make other small touches that improve your overall appearance.
  • Smile. Smiling is contagious, and it instantly makes you more likable. Don’t force a grin (or else you’ll look like a robot), but do flash a genuine smile as often as appropriate during the first few minutes you meet your prospective investors.
  • Use your investors’ names. When you speak to your investors, try to address them by name as often as possible. People love to hear the sound of their own names, so it might help you win their favor. As an added bonus, it will help you reinforce your association with their name and face, so you eliminate your risk of calling someone by the wrong name later on.
  • Warm up with something personal. It’s tempting to get down to business right away, especially because your investors’ time is limited, but in most cases, it’s better to warm up with something personal—even if it’s only a few lines of a conversation. Tell a funny joke you heard earlier in the day, or share an anecdote about how your morning has been going. It makes you seem more personable and charismatic.
  • Find a common link. If you can, try to find something in common with each of your prospective investors. You might comment that you got your tie at the same place they did, or that you use the same type of pen. Look for subtle clues about their personalities, lifestyles, and hobbies, and forge a connection through those channels. People disproportionately like other people like them, so the more commonalities you can find with your prospective investors, the better.
  • Watch your posture. Your posture says more about you than you might think. Keep your back straight with your shoulders back, and walk confidently with your hands out of your pockets. This is crucial for projecting confidence (and feeling it internally as well).

If you can land a great first impression, you’ll set the stage for a killer presentation—but don’t think you’re out of the woods yet. You still need to make sure you have a fantastic pitch deck in place, and enough knowledge on your startup idea to handle the toughest investor questions. If this is your first pitch, don’t worry – it does get easier – but the fundamentals are always going to be important.

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