Although there are many factors that influence our loan approvals, one of the most significant is a potential borrower’s credit score. Having a better understanding of your credit and being mindful of your personal finances can have a positive impact on your ability to borrow as a business owner.
A FICO Credit Score is made up of five components: 35% payment history; 30% debt amounts; 15% length of credit history; 10% new credit; 10% types of credit in use. For individuals to raise their credit scores they must exercise responsible actions in regards to bills and credit usage.
We have collected frequently asked questions to help potential borrowers better understand their credit scores and how their financial decisions affect their scores over time.How To Build Your Credit Score and Benefit Your Business #LearnMore Click To Tweet
What exactly affects my credit score?
Credit card balances, student loans, mortgages and car payments are the largest factors on your credit.
Do late payments affect my credit score?
Absolutely. Thirty-five percent of the FICO score is payment history, therefore when you have a late payment, the credit bureau has it on file and it has a negative effect on your score. Trends in payment patterns, account duration and applications for new accounts are all influencers on your score.
I pay for everything in cash, but I do have one credit card. Why is my credit so low?
Since the FICO score is made up of several different components, one credit card doesn’t produce enough revolving credit for the score to increase. Rather than always paying in cash, you can increase your credit usage and debt amounts by using your credit card. However, don’t forget to pay your bills on time to add the maximum amount of points to your score.
How do I check my credit score without paying fees?
There are several phone apps and websites that check your credit report for you. Credit Sesame and Credit Karma are two of the highest rated free credit apps on iTunes. The only thing required is your social security number to track your credit and accounts.
My credit score is above 700… now what?
Great job! Keep up whatever practices you’ve been applying to your credited accounts. The higher the score, the better; if you keep paying on time, keep your accounts open and don’t apply for any more credit cards, you’ll stay in good standing.
* Source: Experian.com