Whether we are talking about your business or personal credit scores, the higher number the better! When it comes to helping your business succeed, a good credit history is imperative.
We'll go over the pros of having a good credit score, the cons of having a bad one, and what you can do to repair your credit if you want the advantages a higher score will bring your business.
The Pros of Having a Good Credit Score
A credit score above 720 is considered to be a good credit score. You will be deemed creditworthy and it will help you access the capital your business needs in order to grow. The pros of having a good credit score include:
- Being able to choose which lender you use
- Faster approvals with less documentation required from you
- Lower interest rates
- Lower processing credit, and appraisal fees
- Access to a high line of credit
- The option to pay for goods and services up to 60 days after delivery
- Access to short-term bank financing such as revolving lines of credit
- Access to *prompt-pay discounts* which can save up to 2 percent on an invoice
If your credit history is great, you'll be able to easily fund (and pay off) your business ventures.
the cons of having a bad credit score
A credit score of less than 560 is considered to be a bad credit score. When banks, vendors, and other financial companies see a low number when they review your credit report, you are seen as a risky investment. Some of the cons of having a bad credit score include:
- Higher interest rates
- Higher processing, credit, and appraisal fees
- Lower lines of credit
- Unfavorable trade terms
- No access to short-term bank financing such as revolving lines of credit
- Restricted use of loaned funds
Ultimately, if your credit history is bad enough, you may be deemed uncreditworthy.
how to repair your credit
In order to repair your credit, you first need to know what is in it. It's important that you check both your personal and business credit reports by visiting Experian, Equifax, Transunion. You can register to check your credit once a year for free.
Your report will show all of your credit accounts (and your payment history), who has inquired about your credit (both voluntary and involuntary), and your bankcruptcies, foreclosures, liens, and other public record information.
Next, look over your report carefully and find any discrepancies. It is common to have errors and outdated information reported. Contact the companies who show the discrepancies and work with to get them resolved.
Finally, improve your score by paying your bills on time, keeping low balances on your credit cards, apply for and open new credit accounts judiciously, and pay off your long-term debt.