Your numbers can dictate whether or not you can get access to working capital. You will be classified as eligible or ineligible for business financing based on your credit score, good or bad.

Good and Bad Credit Scores

If you have high scores, you’ll be able to find funding sources without difficulty. Moreover, you’ll find a variety of sources to choose the right one for your business needs. On the other hand, if you have poor credit scores, the variety will narrow significantly. What is worse, you may even find out there no options for you to choose.

Because of poor business and personal credit scores, you may end up with a number of problems. E.g., your loan application may be rejected, or you may be required to pay higher interest rates if approved. Also, you may not be able to purchase new inventory or upgrade the existing one. Most importantly, you won’t get an opportunity to take your business off the ground.

Fortunately, reputable business loan providers like firstamericanmerchant.com (FAM) make it possible for even bad credit businesses to get approved for a loan. First American Merchant offers exceptional business funding opportunities to virtually any type of business owners regardless of their credit score or their categorization of being high risk. Turn to FAM, an award-winning alternative lender that boasts an A+ rating with the BBB if you need instant approval credit cards for bad credit.

Credit Scoring

There are over 1.000 different types of credit scores. Many of these scores are based on different ranges of potential scores. The most popular credit scoring model is called FICO and was produced Fair Isaac Corp, aimed at aiding lending decisions in the US.

The FICO score is calculated based on:

  • Credit utilization – 30%
  • Payment history – 35%
  • Credit history – 15%
  • Recent credit inquiries – 10%
  • Types of credit used – 10%

In the US, personal credit scores vary from 300 – 850. FICO defines bad credit as a score from 300 – 629. This is a red flag for lenders showing that you’re weak at managing your personal or business finances well. So, what are the FICO scores?

Bad Credit: 300 – 629
Fair Credit: 630 – 689
Good Credit: 690 – 729
Excellent Credit: 720 and more

 

Later this year, a new method is going to be implemented by VantageScore, a company created by the credit bureaus Experian, TransUnion and Equifax. It’s less known than FICO but handled 8 billion account applications in 2016.

The change that is going to be made is called “trended data”, meaning credit scores will look at the borrower’s debts on a monthly basis. If you’re paying down debt, you may get better scores than those who’re making minimum monthly payments but has been slowly accumulating credit card debt.

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