How to Check Your Credit Score Before Applying for a Business Loan

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As a business owner, you have to be careful about the actions you take. Once you become responsible for the operations of a company, each move you make should be firm and calculated. This is not only because everything you do reflects upon your brand but also because you are under scrutiny from investors, competitors and even customers. The assumption that if you make a mistake it will be ineffectual is hence wrong and this is where you need to be meticulous. When it comes to the financial aspect of running a company, no decision is unimportant and every choice must be made after consideration and thought. When you first start a company it does not have a credit score attached to its name. But as you run your business, the credit score builds up. Besides this, your personal credit history is also in the books and impacts you greatly. So, do you need to check your credit score when applying for a loan? And does it matter in the long term?

A dip in your credit report can have long-lasting effects on the business you own. Checking your score every now and then keeps you updated and allows you to have an idea about where you stand financially. Unless you have the chance to obtain working capital loans with no credit check, you need to keep a good score for the future of your company. The following article will elaborate on what your credit score is and how a good one helps you acquire any loan you prefer.

WHAT IS A CREDIT SCORE?

A credit score and a credit history are two interlined terms that you must know of. While credit history is a list of your past accounts, your credit scores the number that showcases how good your history is. Your history showcases all issues you may have had with credit in the past, like foreclosures and bankruptcies. So, your assessment or credit rating is the score that tells a lender what kind of risk you pose if you acquire a loan from them. These scores range from 300 to 850 and are a major indictment of whether your application gets approved or not.

Personal Credit Scores:

Personal credit scores reflect how you handle your known financial obligations. During the loan application process, lenders will ask for your personal credit history alongside that of your business. The idea behind this is that the way you handle your finances and credit is relevant to how your business does it as well. Lenders take data points from your personal scores when they review your loan application, thus making this a deciding factor for the future of your company.

Business Credit Scores:

Business credit scores are an indication of whether you are a good enough applicant to receive any type of loan. These are calculated by commercial firms to see whether business and its financial obligations are a risk or not. The financial relationships your business has with lenders and vendors, your invoices and repayment histories and your legal filings all decide the business credit rating.

THE IMPORTANCE OF HIGH CREDIT SCORES:

The way lenders see it, the higher your credit score is, the better chance you have of getting a loan. This is because it shows that as a business owner you are more likely to repay your debt in a timely manner without delays. Even though credit scores vary, the general acceptance of a good rating is from 660 to 724. When you have a high score, it demonstrates how financially responsible you have been in the past and how it will reflect accordingly in the future. Besides this, having good credit is important because:

Low Interest:

The interest rate on your loan can be reduced significantly if you have a good credit score. You can qualify for the best interest rates and this means you will be able to pay off your debt quickly and easily, while still having extra money for other expenses.

More Chances of Approval:

When it comes to getting a business loan, a good credit history helps a lot in getting a positive response. Lenders will consider a number of factors when reviewing your application but a great score and reliable credit history make your chances for approval significantly better.

More Negotiating Power:

Good credit scores give you a lot of leverage when negotiating the terms of your loan. Your bargaining power can be improved if you have a number of offers from different lenders based on the quality of your credit reports.

CHECKING YOUR CREDIT SCORES:

One of the first things lenders do when reviewing your loan application is to look at your credit rating. Therefore, it is advised that you take a look at your credit reports and histories annually to see if there are any pressing concerns. Your credit card provider also tends to provide credit score access to you so you can keep a check on your ratings. Sometimes you can access your reports for free while other times you might have to pay a small price for a copy of the details. All of this can be done online on the credit card’s websites. To check your score, you can simply pull copies of your reports from qualified bureaus, such as Equifax, Experian, and TransUnion. You can cross-check the ratings against one another as well as against any insurance scores you have for maximum accuracy. If a credit card issuer is in the FICO Open Access program, you can easily access your FICO score with all needed statements. The figures might differ slightly, but you will have a good enough idea about how you will fare when you apply for a loan.

THE BOTTOM LINE:

Above everything else, you need to make sure that you use your credit responsibly with care. When you pay attention to your expenditures, you can build up a good credit history over time. This will allow you to make purchases and acquire loans for your company whenever needed and, henceforth, will let your company stay in control of its finances and debts.