If you are under the impression that your credit score is only relevant for your personal finances, you are mistaken. The fact is that your credit score plays a massive role in both your personal and business finances. If you are considering borrowing capital for your business, you will be surprised to know that your credit score holds a lot of power. A credit score is one of the most important aspects of your financial life. It represents your ability to honour your credits. Naturally, business lending institutions judge your creditworthiness based on your credit score.
Since your personal credit score is a reflection of how you handle your personal credit obligation, lenders consider your credit score an important data point while reviewing your business loan application. Lenders go by the belief that your personal money management skills will eventually have a bearing on your business finances as well. Hence, the credit score for a business loan is generally high. If you are planning to avail a business loan soon, it’s important to understand the factors that affect your credit score and what you can do to improve your score.
What Makes a Bad Credit Score?
While there are numerous ways to get a bad credit score, mismanagement of finances is one of the primary reasons. Being aware of the reasons that lower credit score can help reduce your exposure to them:
- Late Payments- Making constant late repayments on credit cards or loans can affect your credit score for the worse.
- Defaulting on credit card payments: Failure to pay your credit card bills on time is one of the most common ways to damage your credit score.
- Bankruptcy – Filing for bankruptcy is the most drastic way to damage your credit score.
- Defaulting on Loan Payments – Failure to make loan payments will lead to loan defaulting which will have detrimental effects on your credit score.
How to Boost Your Credit Score?
While there are no shortcuts to improve your credit score, the damage can be fixed over time. Managing your finances and debts diligently is the most effective way to ensure that your credit score remains stable and beneficial. Here are some simple tips to improve your credit score:
- Set up payment notifications- Making timely payments is a critical element of a good credit score. By setting up payment notifications, you can ensure that you never miss payments by mistake.
- Reduce your debt – Change your spending patterns and stop relying on credit. If you already have multiple debts, this can be difficult to achieve. In such a case, you can apply for a debt consolidation loan and pay off all your debts comfortably.
Is It Impossible to get a business loan with a Bad Credit score?
Without a doubt, a good credit score is your ticket to success for a business loan. Even if you have a bad credit score, you need not fret. Certain banks and NBFCs do offer business loans to those with a bad credit history. However, you may have to pay a higher rate of interest on your loan. At Finserv Markets, we offer business loans are competitive interest rates with a quick application process. Apply for a Bajaj Finserv business loan with Finserv Markets and get the required finances to take your business to new heights.
Finserv Markets, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment, and exclusive EMI store, all under one roof- anytime, anywhere!