Excellent credit score means you can qualify for funding at lower interest rate and better terms. A credit score is an important measure of a business’ financial health. It indicates your constancy to small business lenders. If you have a bad credit, you will certainly hear a big No from your lender. Therefore it is important to take some serious steps to improve your credit score. According to a recent survey, 25% of millennials in US don’t know what a credit score is. Therefore it is important to first look at credit score.
In US, almost every lender use the FICO scoring system to determine the borrower’s credibility. FICO collected data from all three credit bureaus, Experian, Equifax, and TransUnion. These credit bureaus collects internal financial data, and also have their own scoring system called, VantageScore.
Not getting approved for a business loan? Take a look at your credit report. Possibly your credit score might be the reason of your loan rejection. If you have low or bad credit score, try to improve it before applying for funding. Here are some tips that will help you to improve your credit score step-by-step.
- Check out Your Credit Reports
You first need to pull a copy of your credit report and check it to see if there is any error or wrong information on it. According to Federal Trade Commission, 1/5 consumers have some mistakes on their credit reports. If you have any mistakes on your credit report, ask the credit agency to fix it because problems on credit report will reflect on your credit score. Under The Fair Credit Reporting Act (FCRA), you can get all thee copies of your credit report for free. Check is all your personal information is accurate on the report? Is there any inaccurate listing of late payment that you made on time?
The credit score criteria range from 300 to 850. With 750 and above being considered as excellent credit score and below 600 are considered bad credit score.
- Make Strategy to Improve Credit Score
After fixing information on your credit report, you need to make strategy to improve your credit score. The first step toward improving your credit score is to minimize your credit card balances. The second most important step is to start paying down your debts. Don’t apply for a new credit card or open a new credit account because it will adverse your credit score.
- Fix Your Late Payments
You need to fix your late payments by setting reminders for payment dates. Get organized with your financials. Ask your lender if they can exonerate that late payment. If you have a long track record of making payments on time, lenders will usually exonerate that late payment. Delinquent payments can remain on your credit report for up to seven years. The late payment condition will usually happen when you passed the due date for almost a month.
- Apply For Credit When You Actually Need It
Don’t make too many funding requests in a short period of time. By doing so, you are risking you credit score because these loan requests are saved on your credit report. It will also deliver a negative impression towards your lender. That is why it is advised to only apply for funding when you actually need it.
- Take the Ownership of Your Credit Profile
It is important to have an active credit account as it will help you in improving your credit score. Having an active credit account delivers a positive impression to your lender indicating that you have good credit commitments. This doesn’t mean to take on multiple credit cards and loans, what it means is to start slow on a small level and take the ownership of your credit profile.
- Get a Bad Credit Business Loan
The final step that you need to take to improve your credit score is to get a bad credit business loan. These loans are especially made to help small business owners experiencing bad credit problems. Bad credit business loans not only help businesses to fund the in growth of their business, but it will also help them to improve their credit score by repaying the loan in a timely manner.