Before you can make any determinations on what type of loan you can qualify for, you need to have a deep understanding of your financial situation. If you have filed for bankruptcy, defaulted on a loan, or missed payments in the past, these factors may still be negatively affecting your credit score. Many people will find that free tools like www.annualcreditreport.com or one of the individual reporting agencies like TransUnion or Experian will be sufficient to explore the items on their record to determine if there are any inaccuracies or items that aren't recognized. In more complex cases, or where there are several items on the report with mistakes, contacting the credit bureaus directly may be the best option.
Keep in mind, credit agencies are obligated to provide you with a free copy of your credit score each year, but they are not obligated to provide you with your FICO score free of charge. In many cases, you can obtain your FICO score by paying a small fee. Alternatively, many banks and credit card issuers will give you a copy of your credit report and FICO score as a service with your online account.
Debt types and amounts can also affect your credit score to a great degree. Even if all of your accounts are in good standing, carrying a large amount of credit card or revolving debts can negatively impact your credit score. Credit agencies rate what is sometimes known as an "Overall Debt Utilization" score, which assesses the dollar amounts of your debts owed against the total dollar amount of the credit available to you. If you have two credit cards with a combined credit limit of $20,000 and you have spent $18,000 between the two cards, your credit usage of 90% may make it difficult to obtain additional personal credit accounts.
Improve Your Credit
The absolute best thing that can be done to improve the chances of both being approved and subsequently receiving a favorable rate and term is to improve your business and personal credit. This is definitely not as easy as it sounds, but can be done over time and through taking common sense steps.
By reviewing your existing credit report, you can identify areas that may contain inaccuracies, such as old or erroneous collections reports and debts. Using the Annual Credit Report tool outlined above, you can contact the credit bureaus to dispute or update information on the report.
After you have ensured that all information on the report is accurate, start assessing your current debts and make a plan to begin paying them off. Revolving debts like credit cards or lines of credit are some of the most impactful on your credit, but also require quite a bit of planning to pay off while not re-using the available credit.
Business credit is dependent on vendors' credit and payment accounts, as well as staying current on taxes, leases, and other installment debts. Planning your cash flow around keeping these accounts in good standing will help your business remain free of credit issues.
Personal vs. Business Credit
Applying for a business loan will also require credit assessments beyond your personal history. Banks and other lenders will take your business' payment histories, financial statements, court judgments, and other related incidents into consideration when you apply for a loan. Businesses that have defaulted on past loans, missed payments on other accounts, or that are currently involved in an ongoing legal issue will find it much more difficult to obtain a loan.
Business financial records are far more complicated than individuals' credit in most cases, because business credit involves much more than loans and credit accounts. Many vendors deliver to businesses on good faith and missed payments or delayed repayment can negatively affect the business' rating.