Business owners are often faced with the need for more cash and mitigating that need can be tougher then one may think. First off, start-ups have almost no chance in getting a loan that is secured by the business without any personal co-signers because there isn’t any money or established credit in the business yet. If there isn’t any credit in the business then the probability of getting a loan is next to nil. first thing to do is to improve credit score.
This is why start-ups are indefinitely on the prowl for investors. They need the cash in order to move forward. This is a problem that many SMEs face throughout their start-up journey and many of them never can get over the hurdle. You need good credit in order to get more credit, but you can’t get credit if you don’t have credit. See the Catch 22 here? So how does a business boost it’s credit so that financing can come easier?
First tip to improve credit score – Start Small
One of the best ways to get your business credit going in the right direction is to start with small lines of credit. Business owners can accomplish this by using their personal credentials as a cosigner in an effort to receive a line of credit. An example of this would be a credit card or department store credit, where the requirements aren’t that strict and amounts of issued credit can be based off of the cosigner’s creditworthiness.
Once the business begins to show payment history and the signs of a low risk user, say over 12-18 months, then the business will have the flexibility to start getting the same kinds of credit cards but without a cosigner and can build their creditworthiness.
Once you have it, use it strategically
Once you have your credit lines use them often. The more traffic you show on your credit cards makes you more a reliable source of income to the lender. Credit card companies want you to use their cards, and they want you to keep a balance too. Remember, financial institutions lend money to make money.
If you pay all of your balances in full every month this may actually deter a credit card company from approving your application. When trying to build or boost credit, playing the game is key. Keeping a low balance shows consistency. You are consistently making the credit card company money.
Hold on there, don’t get too crazy
Lets be clear here – you don’t want to improve credit score to the max either and YOU MUST PAY YOUR BILLS EVERY MONTH. Maxing out your credit will certainly appear as a risk to lenders. And if you fail to pay your bills on time or at all you can guarantee the delinquency will appear in your records, resulting in a decrease in your credit score.
Review your credit history and correct errors
Lenders report their activity to credit bureaus. Those credit bureaus in turn reflect that data specifically on your credit report and it isn’t a perfect system either. Mistakes get made by lenders when they report because of various reasons and then those mistakes show up as a demerit to your credit standing.
It is the responsibility of each individual to manage his or her business credit and it isn’t hard to do. You can write to any of the credit reference agencies and ask for a copy of your credit reference file, at the cost of £2. Your letter should include:
• Business name;
• Your name and any other names you have used or been known by in the last six years eg your maiden name;
• Your full address including postcode;
• Any other addresses you have lived at in the last six years;
• Your date of birth; and
A cheque or postal order for £2 made payable to the credit reference agency
Here’s a list of the bureaus
• Equifax Ltd
Credit File Advice Centre
PO Box 1140
Bradford
BD1 5US
0844 335 0550
www.equifax.co.uk
• Callcredit Plc
Consumer Services Team
PO Box 491
Leeds
LS3 1WZ
0870 060 1414
www.callcredit.co.uk
• Experian Ltd
Customer Support Centre
PO Box 8000
Nottingham
NG80 7WF
0844 481 8000
www.experian.co.uk
Don’t ask too many times in row
If you keep applying and keep getting rejected it’s time to try another route. Each time you apply results in an inquiry within the credit bureaus and each time you fail to qualify for the loan and get rejected is reported within your credit history. you think this will improve credit score ? obviously not .After a couple of rejections, its time to go get a cosigner or try alternative lending sources.
Use alternative lending avenues such as ezbob
That’s right folks, ezbob can help you improve your credit rating. Because alternative lenders rely upon different credentials when making an approval decision, you can actually get a loan with a lender like ezbob that you couldn’t get through a financial institution. At ezbob we rely on five things:
• You must be over 18 years old.
• Your business must be registered here in the UK
• You need a valid business debit card
• You are a director/owner/partner of the company
• You have a minimum annual turnover of £10,000
We don’t require longstanding good credit in order to give you a loan. Once you get approved and issued the funds, your credit starts creditworthiness clock starts ticking . As long as you PAY YOUR BILLS consistently and show a balance that is acceptable within your finances you will see your score slowly rise.
One trick for the trade to improve credit score
Once you have credit cards in the business you can do a little trick that actually helps boost your credit standing – Report them stolen. Because identity fraud is such a risk financial institutions will immediately close your account and open a new one with a new number resulting in an added account.
ABC news says “If that account has been open for a long time, you now have two trade lines with that length of history, which increases the average age of your credit. Credit age makes up roughly 15% of your credit score and the older it is improve credit score gets easier“
So there you have it, some useful tips for those of you trying to improve credit score, and one for the road, a cheap trick if you will. Using some or all of these methods will certainly point you in the direction you need to go. Good luck out there, being in business is a tough world that requires lots of cash.
The post The best ways your business can improve credit score appeared first on ezbob.