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Starting up a business could be a difficult path especially when applying for financing. Whether the business path is recent or not, every business owner has experienced some challenges and losses. Benefits of strong credit score is an extremely important credit attribute and your businesses future could depend on it. Especially, when more lenders are rigid about their lending policies. Starting a business with strong and poor credit can be both helpful and negative. Below we would digest this subject more and cover credit score attributes part of financing. The credit score that we are covering is personal credit score as FICO versus business credit score.
A FICO score is a 3-digit number that is determined on the information in your credit reports. The FICO or Fair Isaac Corporation debuted FICO scores to provide an industry-standard for scoring creditworthiness of applicants. It’s used to level out the playing field between lenders and consumers.
A credit score is a number that rates your credit risk attributes. It can help creditors or lenders determine whether to give you credit or not. Below are different credit scores that determine the range of excellent, good, fair, poor and very poor credit scores. Data below is provided from Experian data showing a credit pool range:
A business credit score is a score that determines past behavior of your financial credit actions. The score prominently engages in determining how you perform in paying debts, how many credit cards you have on hand, your payment history, how are you using your credit cards per credit utilization, how long you had credit cards on average and other factors. All of the mentioned determine your score range which is between 300 and 850. Based of Experian data credit measurements a credit score range between 661 and 780 is considered as a good credit score.
Traditionally, a good credit score or excellent credit score would determine how well you can pay off a loan. Lenders classify you on risk grade. Traditional banks as an example only want to see good and excellent credit scores. Anything under 659 is considered as risky and greatly effects approval rates. At Creditfy, we provide loans to businesses with very poor credit scores. We reward consumers more with excellent scores with lower rates. Business owners should not be discouraged if they have very poor or poor credit from applying for financing.
A good credit score range of 661 to 780 or an excellent credit score range of 781 to 850 helps business owners greatly. Below are some of the benefits that business owners can benefit from in having strong credit.
Access to expansion and business growth is based on your ability as a business owner to obtain fast financing when needed. With fast financing and good terms, you can undertake additional contracts or work versus being financially limited.
With strong or good credit your odds of obtaining an approval is much greater than having low credit score. The lenders are more than often hesitant to lend to businesses that have a poor track record. It’s essential that you maintain a current payment history. If your credit is poor, you can still obtain a business loan. It can yield to a higher interest rate versus and loosing the benefits of not having strong credit.
You can obtain much better loan terms with stronger credit. Majority of businesses that have proven their creditworthiness obtain longer terms. They get lower interest rates, early payoff discounts and lower origination fees on average as an example. You also have the power of negotiating and asking for lower interest rates! Also an ability to increase your loan approval.
With stronger credit, you can obtain favorable terms with your suppliers. Vendors would place more trust in you and provide you favorable terms. Having trust from your vendors or suppliers could allow you to operate your business without the need of financing. The vendor or supplier will be more than obligated to help you obtain better terms in order to secure your business.
Since now you understand the importance of a good credit score, you can adopt better financial habits that won’t derail your score or your ability to obtain financing for your business. Some of the measures below can be taken to increase or maintain strong credit score and achieve full benefits:
We advise to sign up with Credit Karma that would allow you to access your credit profile without any cost. Sign-up and they will provide a score for you from multiple credit bureaus. They will also show you what drives your credit score to increase or decrease and full benefits. Besides allowing you to access your score for free. They will provide you with various recommendations how to improve your score. We recommended to check on your credit score every month and keep a better track of your financing.
In conclusion, having strong personal credit is an essential factor that could help your business obtain financing. Your businesses future could depend on having good or strong credit. Having strong credit is a ticket to financial independence! VIP pass in obtaining favorable financing terms and very low rates as a big benefits with strong credit. At Creditfy, we provide favorable terms to strong credit scores. We do not shy away from fair or poor credit scores. Speak with us if you have any concerns and see our solutions! We work with all credit scores and circumstances. We look at the overall business picture versus just making our decision on a 3-digit score. Apply when you’re ready!