Fixing Your Credit Score (The Right Way)
One of the biggest barriers to your loan request can be your credit score, and in recent years it is a barrier that business owners have been facing more and more. Whether you are seeking an SBA loan or an unsecured loan the odds of a loan request qualifying is raised exponentially when accompanied by a high credit score. Unfortunately, this places some business owners in a position they really shouldn't be. Though a credit score is best indicator to a lender whether to accept a loan request, after 2008 recession a high credit score is simply not something a lot of business owners can boast.
Twice this week, I received calls from potential clients who were working hard to build their credit again while running successful businesses. Building your credit score can take time (as such should be began a few months atleast before applying for a loan) but with the right steps it is not difficult. So for business owners in particular that are trying to build up their credit score here is a few steps.
Let's start with the ones you might already know about.
- Pay your bills on time, if wasn't an option before make it a priority now!
- Add some form of an installment loan (mortgage, auto, etc.)
- Have an active credit card that you make timely payments on.
Now to bust some myths with the help of MSNBC
- Disputing information may not always strike negative information from your credit report. Also, temporary deletions may lead you to believe you're in the clear but the item in question may return a short time later.
- You do not need to go to a credit repair firm to fix your credit. Most of the information you need is online or at your local library. Make a plan, follow it, and save your money.
- Paying off old debt before new ones may not help you, try paying off your most recent debts first.
Here are something you may not know about building your credit score.
- 35% of your FICO score is based on your payment history.
- Keep accounts you have had for a while open because it shows you have a long history of being a good borrower.
- Check your credit score either through TransUnion,® Equifax,® or Experian® every year to make sure any problems and errors are taken care of.
- Paying your rent through williampaid.com (a partner of Experian) can help you build your credit history through making timely rent payments. It's free if you sign up for electronic withdrawal.
- Get a credit builder loan. These small and easy manage loans can significantly increase your credit score.
- Lenders like to see a big gap between your credit limit (on credit cards) and your spending. Keeping this gap will help you become more attractive to lenders.
- Do not simply close your account after you have paid off your card. See number 2.
- Do not open retail credit cards because if you have a limited credit history this may appear as you taking on too much debt.
*This page will be updated weekly with the latest tips for improving your credit score.