Credit Improvement: Raising Your Credit Score to Get Business Financing

Business loan applicationBorrowers who would like to put up a business but have unfavorable credit may face a difficult time getting a business loan as creditors consider one’s credit standing as one of their criteria for approving a loan. Even if the borrower is approved, he or she may face higher interest rates, less favorable payment terms, and higher insurance premiums. Thus, borrowers who want a higher chance of approval, as well as qualify for lower interest rates should focus on improving their score. Keep these things in mind to raise your credit score and obtain a favorable outcome in your business loan application.

Build up Your Debt-to-Credit Ratio

Debt-to-credit ratio is a percentage of your total debt in relation to your available credit. You can improve your ratio by doing one or more of the following: ask for a credit limit increase, pay down your credit balances, and roll over your credit card debt into a personal installment loan. Take note that a low debt-to-credit ratio shows lenders that you are using your credit responsibly.

Make Payments to Creditors on Time

While each credit bureau utilizes slightly different ways of calculating business credit scores, all of them look at your history of paying creditors. Thus, make sure that you pay on time. Given that the bulk of your credit score comes from your payment history, it’s important to do everything you can to avoid late payments.

Refrain from Setting Aside Money while Missing Payments

Even if you have a big ticket item that you want to buy in the future, you should not set aside money at the cost of missing payments on things you already owe your creditors. While it can be enticing to save money for business expenses, your priority should be to stay on top of your bills.

Improving your debt-to-credit ratio, making on-time payments, and staying on top of your bills can help you gain a credit score more likely to help obtain a business loan at a desirable interest rate. An excellent credit score doesn’t just open up better business loan opportunities; it can also attract new clients into your business, too, as anyone can look at a business credit score to gauge a business’ trustworthiness and accountability.