Both of your business and personal credit score play an important role in deciding your credit path for the future. When you apply for a loan, your credit history is taken into consideration for taking your creditworthiness into perspective. Lenders decide how credit worthy you are and whether they can hand a small business loan to you.
If your credit score doesn’t match the requirements of the lender, you wouldn’t be able to secure a good loan for yourself and your business. Here we mention some of the factors that impact your credit score and how you can work on them to get the best results.
Your payment history has the biggest impact on your credit score. Credit reporting agencies realize that how you pay back your current credit should be the primary factor dictating how you respond to credit in the future. If you aren’t able to pay back credit right now, you will never be able to meet the requirements in the future. It is necessary that you keep a thorough check on your payment history, so that you don’t err when it comes to taking a small business loan in the future.
Businesses pay back loans that they currently have at their own pace, not realizing just how much of an impact it can have on their ability to get a loan in the future. If you feel that a payment plan is too harsh for you to follow, you should outline that from the word go. Do not make the entire process lengthy and troublesome for you, just because you were stubborn during the start and thought that you could pay installments on a loan that was way out of your payment range.
How much of your available credit you utilize is the second primary factor influencing your credit score. A low credit utilization percentage is perfect as it indicates that you are a good spender and do not extend your credit requirements to the limit. If you aren’t being judicious with your credit spending you should know that the repercussions can be quite taxing and can have quite an impact on you.
You can decrease your credit utilization ratio by increase the limit on your cards or by lowering your spending.
Length of Credit History
Your credit score is heavily dependent on your credit history and how long you have been taking credit for. If you are just new to the world of credit, you won’t have as stellar a credit score as some another business that has been in operation for longer and has been taking and paying back loans religiously.
A healthy credit report includes multiple credit types and payments method in it. This diversity in payment and types indicates that you have been a healthy spender and have had a keen eye on your spending since a long time now. Any steps that you take to improve your credit score would directly show in it.
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