For entrepreneurs, building and maintaining strong personal credit is essential for the growth of their business. So if you are a business owner, below is a list of things that you should know about your personal credit score.
Financial institutions will always look at your personal credit score before financing your small business.
Your score provides the financial institution with an idea about your repayment capacity. Therefore, before approving your business loan, financial institutions check your personal credit score to decide the loan amount as well as the repayment tenure.
How does a Credit Score Impact the Rate of Interest?
A low score indicates that you are a risky proposition, financial institutions will provide your business loans at comparatively higher interest rates.
Factors that determine your Credit Score for Business Loan
- Previous credit performance
- Current level of indebtedness
- Time for which credit has been in use
- Types of credit available
- Pursuit of new credit
You don’t need to spend more money to improve your score.
Once you know the ways your credit score is calculated, you can use that knowledge to improve it even without necessarily spending more money.
Improving your credit score helps your small business in lots of ways.
Particularly in the early days of your business, having a high personal credit score will allow you to give your company a real advantage. Since it is not built overnight, it is advisable to provide financial institutions with a long history of good credit. This, in turn, increases the chances of your loan approval. Here are a few ways that can help you improve your credit score:
- Make loan repayments on time and for the correct amount
- Keep your outstanding debt as low possible. Extending your credit close to your limit on a frequent basis is viewed poorly.
- You should be aware of what type of credit you have. Credit from financing companies can negatively affect your score in the long term.
- You should try to limit your number of credit applications.
A higher personal credit score means a better financial situation for your business. Therefore, if you’re thinking of getting a loan or starting a new business, remember that maximizing your personal credit score is essential to get your business on track.
With a high score, you can avail Business Loan on Finserv MARKETS at the most competitive interest rates. Flexible repayment options and hassle-free online application process make Finserv MARKETS the most preferred Non-Banking Financial Institution.
“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”!