All the time, people pursue new options for getting the money they need. You may be seeking ways to finance your real estate business, whether it’s through investment or loans. Sadly, your credit score can affect your ability to get loans, insurance, and more. In this article, we’ll discuss how it can affect your business and what you can do to improve it.
What’s A Credit Score And How’s It Calculated?
It’s a number that represents your creditworthiness, and it’s used by lenders to determine whether you’re a good candidate for a loan. A higher score indicates that you’re a lower-risk borrower, which could lead to a better interest rate. The score is calculated using information from your credit report (your payment history, outstanding debt, and other factors).
The five main elements of a credit score are payment history, credit utilization, credit age, a mix of credit types, and new credit accounts. Your payment history is the most important factor in your score, and it includes information such as whether you’ve made your payments on time and how often you’ve been late.
Build Your Credit Score To Benefit Your Business
Creditors want to see that you’re reliable in making payments on time, every time. This includes loans and lines of credit, plus your rent, utilities, and credit card bills. Your credit score is also affected by how much of your available credit you’re using, so keep your balances low. If you have several different types of credit (installment loans, lines of credit, etc.) it can actually improve your score. It also demonstrates that you’re capable of managing different types of debt.
It’s better for your score if you keep old credit accounts open and don’t use them. If you’re building your credit score, specialist websites can explain more about how they’re calculated and how to improve them. You can also find out how long it takes to remedy a low or bad score.
Credit Scores And Business Loans
Business loans can be a great way to get the cash you need to keep your company running smoothly. As we said earlier, your credit score can have an impact on whether or not you qualify for a loan. If you do qualify, it can affect the interest rate you’re offered.
Here’s what you need to know about business loans and credit scores:
- Business loans are available from traditional lenders like banks as well as online lenders.
- The type of loan you’re applying for (such as a line of credit or term loan) will affect the eligibility requirements.
- Your personal credit score is one of the key factors lenders will consider when evaluating your loan application.
Credit Scores And Insurance
Businesses of all sizes need to insure themselves against a variety of risks, from property damage and liability to theft and loss of data. The cost of insurance premiums can be affected by many factors, including the size and type of business, location, industry, claims history, and the credit score of the business owner or manager. A good credit score can help you get lower insurance rates because it shows that you’re a responsible borrower. A low credit score may imply that you’re a higher-risk customer who’s more likely to file a claim, so you may end up paying more for your coverage.
Some types of insurance, such as workers’ compensation insurance, are required by law in most states and can’t be declined based on credit score. However, for other types of insurance such as property and casualty, businesses may be able to shop around for the best rates. It’s important to compare quotes from multiple insurers and to understand how your credit score can impact your rates before you purchase a policy. By knowing what to expect, you can budget appropriately and make sure that your business is properly protected.
Credit Scores And Renting Office Space
Landlords run credit checks on potential tenants in order to mitigate risk. This is to ensure that they’re entering into a lease agreement with a financially responsible tenant. If your company has a poor credit score landlords will be reluctant to enter into a lease agreement with you. This could put a strain on your business, as you may not be able to get the office space you need in order to operate. Alternatively, you may be required to pay a higher security deposit or rent in advance, in order to offset the landlord’s increased risk. In some cases, a landlord may also require a guarantor for the lease agreement.
A company with a poor credit score may be only able to negotiate a short-term lease agreement instead of a long-term one. This can be costly for a company because it may have to move more often and incur moving costs each time. Finally, a company’s credit score will affect the amount of rent they have to pay for their office space. The higher the credit score, the lower the rent.
The Benefits Of Regularly Checking Your Credit Score
If your credit score is wrong it’s going to unnecessarily affect your business. This is why you should check it regularly to make sure it’s accurate. You can secure a free copy of your credit report from each of the three famous credit bureaus (Equifax, Experian, and TransUnion) once every 12 months. You can also check your credit score for free on many websites and apps. If you find any errors, you can dispute them with the relevant bureau. This process can take some time, but it’s worth it to make sure your credit score is accurate.
You should also check your credit report for any indications of identity theft. If you see anything suspicious, report it to the relevant bureau immediately.
As you can see, a good credit score is a powerful tool for any business, but a poor one is a disadvantage. By making sure it’s right and doing all you can to improve it, you’ll soon reap the benefits. You’ll have access to loans and rental properties, and be able to grow your business.