We have seen business owners failing to get their hands on a business loan because of a bad credit score. This is something that small businesses suffer from. Maintaining a good credit score is essential for businesses because they need to be reliable for the lenders. You can calculate the impact of credit score on loans to understand the importance of having a golden credit score.
Your credit history tells the lenders and landlords how you have managed your debts in the past and this history reflects on your credit score. A good credit score means that you have managed your debts well and have paid them on time. whereas a bad credit score tells the lender that you have been a defaulter. This determines whether the lender chooses to lend you money or not because they might not want to provide funding for someone who’s unable to pay off debts on time. In this blog, we will tell you how you can maintain a good credit score.
What Affects the Credit Score?
There are several factors that affect the credit score including late payments credit utilization and credit inquiries. All these factors have an impact on your credit score so you need to be mindful of how to use your credit. Each lender checks your credit score to check your credibility hence maintaining a good credit score is likely to increase your chances of getting a business loan.
Steps to Help You Maintain a Good Credit Score
Pay Bills on Time
Paying off your bills on time has a significant importance for your credit score. Late payments and a bad credit report can cause a loss in your credit score and ultimately it can affect your chances of getting a business loan. You need to track your bills and make sure you payments on time. If you have a hard time remembering the date try to use some apps that help you stay on track with your bills.
Use Old Credit Cards
It is important to have a long credit history. If you show a new credit history it might not be as credible to the lenders as old credit history. The longer your credit history the better chances you have of getting a loan so make sure you use your old credit cards to maintain your credit score.
Stay Below Your Credit Limit
It is recommended to stay below your credit limit for better creditworthiness. Your credit utilization ratio tells the lender about the amount of credit you use. It should be below 30% of your available credit limit for significant importance. This tells the lender that you use your credit responsibly and don’t roam around investing in things without a second thought. The less you use from your credit limit, the more responsible you will seem to the lender.
Don’t Apply for New Cards if Not Necessary
Some people make the mistake of applying for too many credit cards without even needing them. This affects your credit score. Applying for multiple credit cards falls under the category of hard credit inquiry. This means that if a lender identifies that you have applied for multiple credit cards, you will seem less responsible and trustworthy to them. It also implies that you are unable to manage your funding; hence, you need multiple credit cards for the expenses. Hence, it is recommended not to apply for new cards unless it’s necessary.
Check Your Credit Reports
There can also be some errors that affect your credit score. You should check your credit reports from time to time to see whether everything is how it’s supposed to be. This helps you identify errors in the report before it reaches the lender. You can straighten the errors and increase your chances of getting the loan.
It is not an option but a necessity to maintain a golden credit score if you want to receive funding for your business. You can calculate impact of credit score on loans and try to maintain your score as per requirements. 0Percent provides businesses the funding for their operations with a 0% interest rate for the first 18 months. Reach out to them and start thriving in the business world.