Can Credit Score Impact The Business Finance? The short answer is yes. Your credit score can definitely impact your business finance.
Now, as for the long answer, it is an elaborate discussion. We know you have various questions like why and how your credit score affects your business finance. And since it does affect your business, how can you redeem your credit score?
If you are wondering how to perform credit repair, this article will help you initially. Additionally, some companies offer professional services to monitor your credit performance and redeem it.
This article is a one-stop solution for all the queries mentioned above. Read on and know how to make the most out of your credit score.
Bad credit scores can affect your business in the following ways:
After forming their business plan, the first thing an entrepreneur does is to approach venture capitalists and banks for capital.
Your startup capital finances various aspects of your business, including marketing, raw material acquisition, and so on. Startup capital is what keeps your business afloat until the company starts bringing in revenue.
Getting capital is a challenging task with a bad credit score. Therefore, if you are someone hoping to start a business, it is good to begin remedying your credit score.
Inventory and Supplies
Are banks and lenders the only ones who look at your credit score before giving you a loan?
The answer is no.
Other vendors such as inventory and utility suppliers also look at your credit score before sending you supplies.
Having a bad credit score means that you have to pay higher deposits for the supplier’s security. Sometimes they can outright refuse to sell you supplies.
Let’s face it, what is the purpose of acquiring loans if you are going to spend all your budget on paying unreasonable prices for raw materials?
Increased Interest Rates
Even if you manage to bag a loan with your poor credit score, you still have to worry about your interest rate.
Having a poor credit score and acquiring a loan means having to pay high interest rates. This is not the case for a person with a higher credit score, which will be eligible for bonuses and rewards. Additionally, they have to pay lower interest rates and receive funding faster.
Business Loans and Additional Funding
Startup capital alone is not enough to keep your business afloat.
Sometimes you will find yourself short on funds because of additional costs acquired along the way. And if your business is not bringing in cash flow, you have to take up a different business loan.
Again, your credit score hinders getting a business loan or any other means of additional funding. And even if you manage to get one, the extra high-interest rates will be a nightmare.
Your bad credit score and spending habits can put you and your business in a fix. So, how do you redeem your credit score and keep your business financially afloat?
Here are some ways that can help you with repairing your credit score:
Spending money wisely is one of the most vital things when it comes to using a credit card.
Do not give in to your impulse and max out your credit card. Instead, you have to make it a point to spend only up to 15% of your credit limit.
So, what happens if you max out your credit card?
- Your credit score will drop. Credit scores are also based on the credit utilization you do. The more credit you use, the lesser your credit score will be.
- Since your credit score has dropped, you will not be eligible for future loans.
- Once the financial charges are levied, your credit might cross the credit limit, thus allowing additional penalties to be levied.
- If you are someone who makes only the minimum payment, then your maxed-out credit card might take years to pay off.
Pay Your Bills On Time
This is another important way of making sure your credit score does not dip.
Now, what happens if you do not pay your credit card bill on time?
- Debt collection agencies come into the picture. Once they are in your case, you have to pay the entire amount with a penalty fee.
- Once the 60 day period is over, your credit card issuer can add interest of 30%. Your lower interest rates during the initial period are not applicable anymore.
- 35% of your credit score depends on whether you make your payments on time.
- If you make your credit card payments late, the minimum amount payable will increase in the consecutive months.
- Insurance vendors also take into account your credit scores. Therefore, if your credit score falls, your insurance rates will increase the next time you go for insurance renewal.
Keep Track Of Your Credit Score
Now that you have improved your credit score, you wish you could sit back and relax.
We wish it were like that. In contradiction, now that you have a good score, you have a lot to lose. One small missed payment can knock off 100 points off your credit score. To avoid such misfortunes, you need to be on top of your credit score at all times. Monitoring and maintaining it is vital.
Some of the ways how you can maintain your credit score include:
- Automate all your credit card payments to avoid missing out on payment dates.
- Please keep track of your medical payments since they go to collections with little or no notice. A collections account can severely dent your credit scores.
- Identity thefts can have devastating effects on your credit score. Therefore monitor your credit report occasionally.
Finally, if you think you did everything right but your credit score is still taking a hit, then file a dispute. A dispute with a credit reporting company can help you identify the root of the problem and thus improve your credit score.
Credit scores are a reflection of your past and pathway for your present and future transactions. Taking credit scores lightly will not help you with your future endeavors. Therefore protect and maintain your credit scores and enjoy the benefits.
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