Key Steps To Managing Your Financial Profile

loan process

To establish and grow your practice to its full potential typically requires periodic financing. To ensure you can qualify for a loan and get the best rates available, it’s critical to have a strong financial profile – and the single most important thing you can do to improve your financial profile is manage your credit score.  Here’s how:

Understand Your Credit Score

Your FICO credit score distills all the information in your credit report, producing a single number that lenders, employers, landlords and others use to determine your credit worthiness.  Scores range from about 300 to 900, with the vast majority falling in the 600-700 range.  A score below 620 indicates “high risk” and could make financing difficult to obtain, while a score of 750 or above may qualify for the best possible rates.

The key factors influencing how a credit score is determined are shown below in order of significance:

Past delinquency:  The FICO formula assumes that people who have failed to make credit payments in the past will continue to do so in the future.

How you manage credit:  If you consistently use the full limit on your credit cards, you are considered a higher risk than someone who uses only a percentage of available credit and therefore seems to be better at managing credit overall.

Age of credit file:  The FICO formula assumes that people who have managed credit for a long time are less risky than those who are new to credit accounts.

Frequency of credit applications:  The system considers those who submit several credit applications for credit cards, loans or other debt instruments during a short period of time to be a greater risk.

Credit mix:  The formula considers someone with only a secured credit card to be a greater risk than someone with a combination of installment loans (making fixed payments on a specific borrowed amount, such as a mortgage) and revolving accounts (making regular payments to free up more credit, as with a credit card).