Your credit score takes into account previous years transactions along with your present ones. Having a bad credit score can lessen your chances of securing a small business loan. Though improving a credit score is not an easy process. Taking small steps now, will definitely get you started on the journey to better credit score.
This article has mentioned 4 points which will help you to gradually improve your business credit score:
- Make timely repayments:
Late or defaulted payments result in a negative credit score. If your business has a track record of delayed payments then it will reflect in your credit report for 5 years. This will not have a good impression on the lender and they will decline your loan application. With this being said, if you make timely payments then your credit score will improve and the credibility of your business will also improve simultaneously.
- Check your credit report regularly:
This is one of the most important steps to improve your credit score. Your credit score is calculated on the basis of the data in your credit report. It’s extremely important to check all the information in the credit report as even a small mistake can affect your credit rating.
There are credit bureaus which calculate your CIBIL score and also provide credit report. You can tie up with one to get an annual credit report. To get your credit report you must log in to their website and fill up an online application. After submission, you will get your credit report on your registered mail ID within 24 hours. Once you have your credit score, you must check the following points to check for errors:
- Accuracy of personal information (i.e. company name, address and PAN No.)
- Are all credit transactions included?
- Any late or missed payments that you remember?
- Any credit transactions you don’t recognize?
You may find none or a few errors in your credit report and this is where you must take steps to improve the credit score. For each error, you will have to file a separate dispute with the credit bureau.
A credit score ranges from 300 to 850 and it is categorized as below: A score of 750+ comes under the category of Excellent Credit score whereas a score around 600-649 is considered as Poor Credit score.
- Only apply for credit when you need it:
Before you take a small business loan for your business, ask yourself: do you actually require it?
Each time you apply for business loans you are reducing your credit score as loan inquiry is stored in the credit report. Too many inquiries in a short time period will result in a low credit score. The easiest fix for this problem is to apply for credit when you actually require it.
- Build a strong credit history:
Businesses which have been running for a long time can benefit greatly from this point. A good credit history can start from 5 years and go upwards. The longer your positive history, the better your credit will be. For example, a business having a good credit history of only one year will have a credit score in the lower 600’s whereas a business with over 5 years of positive credit history will score around 750 to 850.
Following these tips will help you maintaining a good credit score in the future. Having a good knowledge of the business and its transactions will enable you to handle funds and plan operations accordingly.
In case, you plan to expand you can rely on Indifi for the best-customized loan solutions. They have a digital portal through which borrowers can apply for a loan and upload the documents at the convenience of their home or office. Time for processing and loan approval is also shorter in comparison to traditional lenders like banks and NBFC’s. Additionally, they maintain complete transparency in relation to loan terms and processing fees so the borrower only has to pay 2% processing fees during the entire period of the loan.