how exactly does business credit work? do you have to actually own a real business? does it show up on your credit report? i read something about someone cloaking some debt on one, but can't find an explanation. thanks in advance.
The idea of bus credit is to put it in the name of the business. Until you are really established they will run your personal credit report but put the credit in the name of the business. This is called a Personal Guarantee. Most of the time they will check to see if the business is real. It depends too on how much credit you are trying to get. In my case they call 411 to see if I'm listed. It's cheap to create a business on paper and get a 411 listing. I'm in CA and you can get a business for about $70 and $20 a month for a 411 listing.
The answer to your question depends on the size of the business. In all but the larger busienss ($2 million sales or more a year) the credit fortunes of the business will be tied to the creditworthiness of the owner(s) since the lenders will see the business as invisible for credit purpoises and will rely on the "personal guarantee" (PG) of the owners to secure the debts. Larger businesses, especially established ones, will usually be able to get credit in their own right, without PG's, especially publicly traded businesses. Closely held business almost never will be able to get credit in their own right.
I think there are three separate issues here: personal credit checks, personal guarantees, and separate reporting. A business account can benefit you even if you a personal guarantee is required. As long as the account is reported under the business TIN and not under your personal SSN, your own personal credit will look better because your total balances will appear to be lower.
