Raising Credit Scores

Raising Credit Scores

First, check your credit reports from each of the three credit reporting bureaus. You can do so once a year for free at any of the big three Experian, Equifax, or Transunion. Knowing what is in your reports and what your scores are now will establish where you start to raise your credit scores.

The Credit Score Goal
As a minimum, all owners of the business should strive to have at least 720 personal credit scores with all three credit reporting agencies. The 720 mark is the floor for most business loans of any size. Below 720 you will either receive very little financing, or the rate and term will not be favorable. Above 720 will maximize your available funding, lower your rates, and increase your repayment terms.

Know What to Improve
Your payment history has the largest single effect on your scores. This factor accounts for about 35% of your credit scoring make-up. Any references to late payments be they 30, 60, 90, or more should be removed. Next is your amount of debt which makes up 30% of your credit scores. Here it is mostly about your balance to limits. Keeping your balances below 30% of their credit limit will maximize your scores for this section. Your account type mix makes up 10% of your scores. Here you should create a balance of the type of debt you carry such as installment accounts which are things like furniture loans, student loans, car loans or any loan that has a fixed amount and repayment term and revolving debt are accounts that can be paid down and used again such as home equity lines or credit cards. The age of your accounts is 15% of your credit scores and not much you can do about that other than not close very old accounts. Lastly are credit inquiries that are 10% of your scores and should be kept to no more than 3 per quarter or removed.

Fix Late Payments
Not having late payments is the best way to avoid poor credit, but if you have late payments you should take steps to have them removed. There are many good online resources for helping you to optimize your credit scores either by doing it yourself or hiring someone to do it for you. Either way, late payments will kill your credit scores and make you unattractive to business lenders so you should deal with them before you apply for business loans or business credit cards.

Clear Collections
Open collection accounts are deal killers. They must be removed before you apply for any business loans. Never pay a collection company without first getting them to agree in writing to remove their reporting once the debt is settled. Here too you can either deal with it yourself or hire someone to deal with it for you.

Remove Credit Inquiries
Most business lenders do not like to see more than 3 hard inquiries in the 90 days prior to their loan application. If you have more than three during that period you should either age them out and wait to apply or take on the process of having them removed.

Lower Revolving Balances
Carrying balances of more than 30% of the account limit will lower your scores. This is the easiest area of your credit score to control yourself without outside assistance. Use balance transfers to move money from lower used accounts to higher use one so that they balance out at no more than 30% balance to limit. You might even consider taking out a credit union term loan which is an installment account and using those funds to pay down your revolving account to the under 30% level.

Inside the Level4Finance business success system, you will have access to step-by-step comprehensive business credit building instruction to obtain everything you need to build and maintain strong business credit scores and to pre-qualify for a spectrum of business loan programs.