A good credit score is a pivotal factor for businesses that want to acquire loans. Most businesses usually need additional funds to invest, thrive, and expand their reach. During such times, your credit rating may determine the lender’s decision.
What Leads To A Poor Credit Score?
A low credit score can be a result of various factors. For example, failure to cultivate your credit when the business was developing, financial struggles, or low revenue incomes.
One must first learn the roots of their poor credit score to fix the issue. Lenders typically use details about your FICO ratings, which is 35% of your history regarding repaid debts. Timely debts payment can significantly boost your credit rating.
Another thing to watch out for is the utilization ratio; it shouldn’t be greater than 30%. The remaining 35% is for the total time the credit has lasted (15%), credit mix (10%), and recent credits you’ve applied (10%).
Four Ways to Boost Your Credit Rating
You haven’t hit rock bottom if your score isn’t satisfactory. You can take various steps and measures to improve your ratings and chances of obtaining cash later. Here are four ways to boost your credit rating:
- Request for your credit score statement
Ordering a credit statement will allow you to scrutinize your report and pinpoint possible errors that may be affecting your score. You can get this report from either of the following three bureaus; Transunion, Equifax, and Experian.
Errors to look for include listing of accounts you don’t own or accounts that have been deemed delinquent but the issue was settled.
- Improve your credit payment history
Payment history has a vital influence on credit scores. It’s essential to always pay credits on time. Slow payment of credit lowers your utilization rate.
- Don’t Close Your Credit Accounts
Closing your credit accounts immediately after using them can affect your credit rating. It’s best to maintain them even after paying off everything because they’ll improve your utilization rating, which is a critical credit score factor.
- Manage Your Businesses’ Finances Better
Besides your credit, it’s best to work on your company’s operations as well. Effectively managing your business’s finances can better your odds of getting extra funds when you’re in need. You can track your expenses and income using accounting software and ensure you keep tabs on essential financial documents.
Conclusion
A bad credit score can make the business environment tough for you, particularly during loan applications and processing. Luckily, there are multiple remedies for this issue. Recognizing the factors that impact your score helps you to understand the focus areas and how to improve.