Improve Your Bad credit score: Make it better with these great ways
Making mistakes is a part of the learning and growth process. The financial aspect is one of the areas with the highest risk of failure, mainly due to lack of knowledge. For example, when applying for credit tools for the first time, it is very common to make wrong decisions. Handling credit as if your purchasing power had increased overnight is the worst mistake, but it is time to take action if it has already happened and you need to reverse the damage.
The bad news is that some people carry these bad practices into their business management. A company with a bad credit history and credit score limits its growth potential, as well as its auxiliary resources when facing a crisis. Imagine being on the edge of a cliff, and no one can give you a hand; that’s the situation for companies that don’t have a good credit reputation.
Accessing some small business loans, inventory loans, merchant cash advances, or any other financing product is a priority when establishing a solid business. Especially if we consider that 57% of companies recognize their financial situation as fair or poor during the last year, according to data from the Small Business Credit Survey 2021.
The importance of having a good credit score
To improve a credit score, you have to understand it. Companies like Experian, TransUnion, and Equifax specialize in keeping track of people’s credit activities. While the Fair Isaac Corporation created the Fico Scores, a score that will help you better understand your financial management. This score takes into account the following aspects:
- Loan repayment history
- Length of credit history
- New credit accounts
- Credit applications
- Types of credit used
Having a good credit score is one of the most important requirements when applying for small business loans. This score is a reflection of how you have handled lending and credit in the past, not paying or paying late, using for many financial products, and being rejected or even only making minimum payments, are reasons for your score to be low.
Easy ways to improve your credit score
Although these practices are simple, improving your credit score is not an overnight process, it requires hard work and focus. Achieving a good credit reputation will allow your company to be prepared for emergencies and, above all, to expand its potential; remember that the best friend for a business to grow is financing.
Pay your outstanding debts:
Before acquiring new commitments, you must conclude the ones you have pending. Even though bad records do not last more than seven years, your history must show that you have paid all your debts before any institution.
Open bank accounts:
Many businesses manage most of their capital in cash. If this is the case of your company, you must begin to pass your cash flow through a bank, this way, you will have good account statements to show economic solvency, this aspect is highly valued at the time of establishing your ranking.
Use secured credit cards:
This credit product is a perfect tool to improve your credit score. It is a credit card that works the same as all the others but with the difference that it requires a prepayment to use the credit line. This way, you will improve your records and only use the credit within your means.
Pay your expenses with a credit card:
Using credit cards to pay for expenses you already cover is another excellent strategy. Pay for services such as water, gas, food, and even rent, and cover the amount on time so as not to generate interest. This way you will use the same capital you were already using, but now you will also improve your credit score.
Benefits of improving and having a better credit score
Improving your credit score will allow you to access the right financing for your company. Learn about the different options in the market and find the one that fits your financial needs and payment possibilities. Some online lenders offer financing without a perfect credit score and on competitive terms.
Small business loans and other financial products can be the difference between a successful company and one that will dig its own grave. Don’t limit your potential due to lack of capital; use these best practices to improve your credit score and get the right financing for you. Invest in your talent and that of your team.
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