Almost every business will need to borrow money at some point or another. When this time arises, the business’s credit score is one of the most important factors that lending institutions will consider. This number lets lenders know how large of a risk lending poses, and it plays a key role in determining whether or not you can obtain that loan you require.
If your credit score is less-than-satisfactory, improve and maintain a good credit score before applying for a loan by following these principles:
1. Do Not Open/Close New Credit Card
Both opening and closing new credit cards within the last six months will affect the likelihood of loan approval for your small business. Opening and applying for new cards will procure new credit inquiries, which lenders check for, and will create doubts in the lenders’ minds as to whether or not money can be repaid on time. Closing credit cards will decrease credit scores as well, as it will decrease the total credit limit and, thus, increase the ratio of available credit used. Avoid lowering your small business’s credit score by leaving previous credit card accounts alone.
2. Pay Back All Debts
Lenders want to know that your small business can pay back the loan. Maintaining debts will make the probability of taking on new loan more difficult, as potential financers will question your ability to repay them. With the goal being zero balance, begin paying down card balances as much as possible before applying for small business loans.
3. Maintain a Range of Credits
Having evidence of numerous types of credit and the ability to consistently pay all bills on time will increase credit score. Handling all these forms of credit such as business credit cards, mortgage, and auto-loans simultaneously also shows lenders that you are very capable of paying back bills.
4. Fix Typos
Unfortunately, it is not uncommon for credit reports to contain errors. In fact, up to 80% of reports contain some type of error! Make sure these errors are not negatively affecting your credit score by reviewing official records of major credit reporting agencies.
Need help with your loan application? Can’t figure out what type of loan to apply for? Biz2Credit is here to help. Visit the website or call (877) 861-2210 for help.