If you think that your poor credit is an invincible obstacle on the road to the success of your business, you should know that this is not the case anymore. If poor credit stops you from securing any loans for business, you should not give up as there are options available.
But it is a fact that when you apply for any business finance, the credit history is one of the most influential elements some of the lenders evaluate. Your credit report mirrors the financial performance and growth of your business. Besides this, it also conveys you have managed your business’s financial commitments till now. But still, if your bad credit score stops you from getting the loan, you should read on to the end to see how you can overcome this issue.
So, what is a credit score? A credit score is a crucial metric that assists bridging loan lenders in determining a borrower’s creditworthiness. Some of the lenders calculate the loan depending on the credit history, repayment history, the total amount of debt, and other similar factors. As a result, if your credit score is higher, you have a better chance of securing a business loan.
What affects your credit scores?
Numerous factors affect your credit scores. As a result, they might stop you from getting loans for business. To know about those factors, go through the below points.
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Payment History
Whether applying for bridging loans or other business funding, payment history can matter to some lenders. Even a single missed payment can impact your credit score negatively. Before approving your loan, the lenders always want to ensure you can pay back the debt on time. For this, they consider your payment history to determine your creditworthiness.
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Credit History Length
It is another thing that affects one’s credit score negatively. The longer you have a credit history, the higher will be your credit rating. If your credit history is higher, it can help you increase your credit rating up to 15 per cent.
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Credit Utilization Limit
If you show your inability to reorganize spending habits, it can be detrimental to your credit rating. An increase in credit utilization beyond the limit hurts your credit score as it can be deemed irresponsible behavior.
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Credit Mix
An ideal credit mix is the amalgamation of both secured and unsecured loans. As you might know, you need to submit your collateral to the bridging loans lender to get secured funding. On the contrary, unsecured loans are not secured by any asset. But many borrowers often make the mistake of apply for secured or unsecured loans multiple times. It is a wrong approach as it impacts your credit score negatively. Instead, you should limit the number of enquiries made on your file.
Ways to boost your credit score
If your credit score stops you from securing loans for business, you must work on boosting your score. But the question is how can you turn your bad credit into an acceptable one? Well, there are many ways to do this. To get knowledge about the ways to boost your credit rating, we have listed below some effective methods that will help you access business loans without difficulty.
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Make timely regular payments
Paying all your payments on time and in full each month is one of the most effective ways to show lenders who offer bridging loans that you are a reliable borrower and can also handle credit responsibly. Therefore, always pay all the bills or other payments early and in time to boost your credit score.
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Check your credit report for errors
Another effective way to quickly increase your credit rating is to look at your credit report for any errors or mistakes that can negatively impact you. Your score might enhance if you can dispute them and have them eliminated. By using this tip, you can improve your overall credit score and also access loans for business without much hindrance.
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Opt for longer loan terms
When taking out business finance, try to opt for longer loan terms. It will help you to make sure that you can pay lower EMIs. As a result, you can easily make timely repayments. This way, your credit score will improve if you never default on your loan or skip repayments.
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Avoid taking out multiple loans
You can take out multiple finances, but not at once. Instead, you should repay one debt and then go for another. This is because when you opt for several loans, you might not repay them timely, which will impact your credit score negatively. On the contrary, if you apply for a loan and repay it on time, it will boost your credit score. You can also secure a lump sum amount of money in the future.
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Maintain existing credit cards
You should maintain your existing credit cards, as it will help you to build a solid credit score. Besides this, it will also assist you in improving and maintaining a good credit rating in the future.
Final Takeaway
So, now, it must be clear that you can secure business finance hassle-free even if you have a poor credit score. You should work to boost your credit score by following the ways listed above. In this way, it will help you get future loans without any hassle. In the end, we can expect that your poor credit never works as a barrier, and you can get the loan with ease.