Your Credit Score and You

I’m sure everyone’s well aware of how important your credit score is for a variety of different business and personal reasons. A good credit score can save you thousands in interest, while a bad credit score could cost you not only the ability to get a loan, but the rate of interest will be more likely high. So keeping track of your credit score is very important, as it can affect you in such situations as getting a job, renting an 

apartment, starting a business or even buying vehicle for your business or personal car.

Contrary to popular belief, your credit score does not measure the amount of debt or resources you have, but the risk of the ability to payback your loan. Only 29% of consumers know how costly a low score can be. Most don’t realize that a low credit score can tack on an additional $5,000 to a $20,000 business loan (based on a 5 year term).

So what can affect your credit score? There are five major concerns that can alter your score:

1. Payment history – although the most important, one slip won’t hurt create havoc.
2. Amount borrowed compared to available credit. The less you owe against available credit, the better situated you will be.
3. Length of credit history – raise your score by keeping accounts open, even if not in use.
4. Inquiries and New Debt – these can lower your score. If you are shopping for a home loan, personal loan or business loan, any inquiries made within a month will be considered one inquiry as long as its for similar form of inquiry.
5. Type of Debt – Installment debt (car loan/mortgage) is considered more favorably than revolving (credit card debt) or business line of credit or business loans.

Some things that won’t affect your credit score are the consumer’s age, marital status or ethnicity. More than 50% of people surveyed think that age and marital status can affect the credit score and more than 29% believe that ethnicity is a factor.

Having said all these, we realize that the last three to four years have played havoc on the majority of credit scores. The economy and unemployment have been major factors in this credit down slide. Borrowing both for personal and business reasons has become difficult, even with decent credit. Unfortunately many consumers and merchants have suffered late payments, liens and bankruptcies, or even charge off for non-payment of debt, which lessen their ability to take out business loans to get liquidity to get them back on their feet.

Bottom line, we know what can affect our credit scores and we know how to rebuild toward a good credit standing. In the interim, there are alternative means of financing which will help to rebuild credit, as lending institutions see a positive credit history.

If you have any questions about your credit, trying to apply for a business loan and how you can improve it while also meeting your business need, please contact the our Underwriter to discuss your capital expansion needs. http://www.libertycapitalgroup.com