How to Improve Your Credit Score

Improving your credit score is an important step in becoming a more efficient small business owner. Lowering interest rates on small business loans and increasing the amount of financing for small businesses will help small business owners invest back into their companies and increase small business revenue and create jobs.

Why is your credit score important?

Your small business credit score is extremely important. When small business owners are looking for small business financing, small business loans, or small business lines of credit, lenders review small business borrowers’ credit scores to determine the loan interest rates small businesses will be offered.

With a higher small business credit score, even non-traditional small businesses can improve their cash flow and small business revenue.

How to improve your credit score

First of all, a credit score is a number based on your credit report. It’s supposed to flag potential lenders about how responsible you are in paying off loans. In other words, the higher the score, the good borrower you are assumed to be. However, before taking further action, it would be so much better if you knew exactly what was the cause of your low credit score.

Here are some possibilities to check before you start working on it:

Were You Denied Credit?

This might sound surprising, but you won’t know if there is something wrong with your credit score if no one would give you a loan in the first place, right? Check your report carefully whether there are any mistakes there. Also, try to find out why you were denied a loan.

Is There Too Much Debt and Not Enough Income?

It’s quite unheard of, but if your debt is higher than your income, this will give lenders an impression that you might not be able to repay the loan, which makes them highly suspicious. If you are employed, look through your credit report to check the ratio of your debt to income. This must be around 25% or lower.

Is There Too Much Credit Available for You?

It is likely that you have too much available credit if you have all those store cards and gas cards, loans, etc. Thus this tells lenders you probably don’t need this loan and would like more credit. If nothing else, it shows that you aren’t desperate for money, which is a red flag to some people.

Is There Too Little Credit Available?

Another thing that might help is adding small loans or small bank accounts there. It’s not just about getting more credit but also about showing that you are responsible for repaying small debts. There is nothing better than small, repaid loans in your history when it comes to proving your credibility in borrowing money.

Was There an Error on Your Report?

Even though this doesn’t happen often, errors can be found on your credit report. For instance, there might be a wrong address or an incorrect credit history. You can request a correction from your bank to avoid this possibility.

Did Someone Steal Your Identity?

If you know for certain that someone took out a loan in your name either without your permission or with the help of a stolen ID, it’s time you did something about it. Thus, it would be wise to request a new copy of your credit report to see if there are any discrepancies or accounts you had no idea about.

If you are a small business owner, your credit score will likely be an issue. According to Lantern by SoFi, small business owners can obtain small business loans for bad credit they need for expansion or other projects without a good credit score.

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