If you are applying for a loan to finance your small business, you are probably aware that lending institutions will scrutinize your credit score. But perhaps you’ve made a couple mistakes in your financial history that caused your credit score to lower, and you ended up with sky-high interest rates whenever you applied for loans. Or worse, you were denied loans altogether.
What can you do if your credit score is not as ideal as you would like it to be?
1. Review Your Credit Report Carefully
Sometimes, there are errors in credit reports. Incorrect late payments or credit limits may be noted in your report, so make sure to clean up any mistakes.
2. Pay Bills On Time
If you have a tendency to forget about your bills or pay them late, there are ways to set up an automatic withdrawal that will withdraw money from your checking account when it is time to pay bills. Or simply make more of an effort to pay your bills on time; set reminders on your phone, mark your calendars — whatever it takes! Paying bills late can blemish your credit report for several years at a time.
3. Don’t Max Out Your Credit Card
Consistently maxing out your credit card isn’t a good idea. Try to keep your credit card balances below 30% of the limit every month, and if you really need to spend more money one month, it is better to be below 30% of the limit on two cards than to max out one card.
4. Try To Have Fewer Credit Cards
The more cards you have, the more difficult it will be for you to keep track of all your bills. Having just one or two will make it easier for you to stay on top of your bills and focus on paying them all on time. Avoid opening credit cards you don’t need.
5. Use Your Credit Cards
It is important to use your credit card to maintain a strong credit score. Even if you just use the card a few times a week to buy lunch, the money you spend will be reported. The bottom line is that you want to prove you can be responsible with credit. So avoid closing credit card accounts because this can actually lower your score. Keeping your cards active for a long time will ensure that you establish more credit history.