Most entrepreneurs often avail small business loans for the expansion of their business. Leading financial institutions provide business loans at competitive interest rates and other attractive features such as instant approval and quick disbursal of the loan amount. While reviewing a business loan application, lenders check the credit score of the applicant. Apart from the business credit score, many lenders also make a note of the personal credit score to assess the overall creditworthiness of the applicant. Therefore, it is always advisable that business owners should focus on building a strong business and personal credit profile before applying for a small business loan.
How is personal credit score calculated?
The credit score is calculated by credit bureaus on the basis of the loan and credit card repayment behavior of the individuals. The major parameters that are taken into consideration while calculating the credit score are mentioned below:
- Credit history
- Utilization of credit
- Credit duration and mix
A credit score is way to measure the financial capacity of a borrower to repay the borrowed amount based on the financial history of the borrower. A credit score is a number between 300 and 900. Higher the score, better the CIBIL report of the borrower. A credit score of 750 and above and is usually considered as a good enough by lenders. Higher the credit score, higher the chances of approval of the loan application. Thus, a good credit score can positively impact decision making in business.
Way to improve your personal credit score
Get up to date with payments
If you have an existing credit card with an outstanding balance, try to pay it off at the earliest. This will boost your credit score significantly. Additionally, you should not close your credit card accounts despite paying them off.
Don’t over-utilize your credit card
Instead of utilizing your entire credit card limit every month, use cash to pay your expenses. Also, to lower your credit utilization rate (It’s the total credit expense divided by the total credit limit), you can increase your credit card limit without increasing your spending.
Clear debts with high-interest rates
To have a good credit report, you must clear your unsettled debts. However, make sure to pay off higher-interest debt before clearing other debts. Also, you can consolidate your debts in order to pay it off faster.
Ensure that your credit report is error-free
Errors in your credit report can hamper your credit score. Therefore, you must pull your credit report and check it for errors. If you come across mistakes, dispute them with the credit bureau and ensure that they are resolved.
Do not delay your payments. This will ensure that your credit score is maintained. Setting up payment reminders for all your credit cards, loans, and other credit accounts will help you make consistent payments. You can also opt for automatic payments to avoid any inconvenience.
Now that you know how to improve credit score, you should work on it to avail better loan options. In addition to small business loans, entrepreneurs can also consider availing a personal loan for business. Personal loans are multipurpose unsecured loans and hence, financial institutions do not enquire the borrower about the purpose of availing the loan. With leading financial online platforms it is possible to avail a personal loan online through an online application process. A high credit score for personal loan can help you avail a comparatively higher loan amount at a reduced rate of interest.
Bajaj Finserv Personal Loans available at Finserv MARKETS have the most competitive interest rates which lets you avail personal loans up to ₹ 30,00,000 which can be approved within 3 minutes. You can also avail Hybrid Flexi Personal Loan, which lets you enjoy flexi part-payments and unlimited withdrawals. Moreover, you can customize your instant personal loan according to your needs and requirements. So why wait? Improve your credit score and avail your desired loan, today.
You can also read about how to get a personal loan with low credit score.
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