It’s nearly impossible to startup a business without any funds. To be able to get funding for your business, you need to provide either a company’s revenue document or show the banks or lenders that you have business experience. If you have neither then getting a loan depends on your personal financial situation. And by any chance, if you have a bad credit then you will only be granted a loan with high interest rates and bad terms.
In this article, you will know how to improve your bad credit and get a loan for your business.
Check for mistakes on your credit report:
It is very common for credit reports to contain mistakes. These mistakes can affect your credit score. It’s essential that your credit reports accurately reflect your financial position. The common mistakes in any credit reports can be incorrect details of credit history, incorrect personal details, old defaults, and judgments.
If you spot any errors on the reports, just notify the credit reporting agency in writings as listed in your credit reports. The credit report agency is obliged to amend the errors as soon as possible if your supporting documents prove the error.
Correcting the mistakes contained in the credit reports can improve your credit score. To be able to manage your finances correctly and effectively, it’s crucial that your financial situation is accurately shown in the credit report.
Pay on time:
One of the ways to improve your credit score is to always pay on time. It’s not a surprising fact that your credit score depends on your payment history. At least 65 percent of your credit will depend on how much available credit you have maxed out and your payment history.
So, improve your credit score by paying on time. This explains that you are able and willing to pay your debt on time.
Get a secured credit card:
Using a secured credit card can help to build your credit score. Properly use your credit card to improve your credit score. Only a good credit can get you a credit card, so this will help your loaners to think that you are keeping a good score.
You will have to put some money as collateral. But as it will fix your credit, it will be worth it. Make sure you pay your credit card bills on time. Otherwise, the whole process of getting a credit card to build your credit will go in vain.
Ask to report your credit history:
One of the easy ways to improve your credit score is to ask the companies you pay monthly to report your payment history to credit bureaus. Most of the time your phone bills, cable bills do not show up on your credit report. These are the bills you pay on time. So if you could show these payment histories on your credit report then they can help to improve your credit score.
Contact your cell phone provider, cable internet provider, utility company and ask them to send your payment history report to credit bureaus. When they will include your payment history for almost 10 years on the credit report, then it’s bound to improve your credit score.
Build your credit with installment loan:
Taking a personal installment loan can also help to improve your credit score. This attitude will show that you are responsible enough to pay off a loan on time.
Ask your lenders to send your payment history to the credit bureaus. The payment histories will build your credit score. And next time, you will be able to get a loan with better rates. Just remember to always pay your installment on time.
Do not look for payday loans:
Payday loans are very risky. If you are unable to pay off on time then you will have to pay to extend the loan. This way you will only get yourself trapped in more trouble. You will fall into a cycle of debt. When this show up in your credit report then it will ruin your credit score.
But of course, if you can pay off your payday loans in the allotted time then you should probably take it. Payday lenders offer a very short period of time to pay off the debt with full fees and interest. So it’s wise not to go for payday loans.
Avoid being transferred to collections:
I cannot emphasize enough how much important it is to pay off your loans or debt on time. When you miss a payment, this lead your balance being transferred to collections. The collection agency then immediately report to your credit bureau and let them know about your missing payment.
This puts a negative mark on your report and ruins your whole strategy about improving your credit score. And the worse part is, this negative marks stays on your credit report for 7 years, destroying your every chance of getting a loan with better interests.
When in doubt go for soft credit checks:
If you apply for a loan with bad credit then it can have a negative impact on your credit score. Some lenders perform “hard credit check”. With their hard inquiry, it’s quite possible that they will decline your application for loan.
Try to find lenders who will perform soft credit check. This way, your application for loan with bad credit won’t impact on your credit score. You can easily be qualified for loans with no worries at all.
Reduce your debt:
This is probably the most expected way to improve your credit score. First, stop using your credit cards. Make a list of all the accounts that you are using. You can get it by using your credit report. Once you get the list, check your recent statements to find out how much you own on each accounts. Don’t forget to check the interest rates they are charging you with.
I know it’s easier said than done. But trust me once you start paying off your debt, your credit score will automatically improve. Make a payment plan that helps to put your budget on paying off debt with the highest interest. This way you can maintain minimum payments on your other credit cards.
Set up reminders:
Some banks offer payment reminders through online banking portals. This way your bank can send an email or messages to remind you when the payment is due. Making your payment on time can be the biggest contributing factors to improve your credit score.
Another way to improve your bad credit is to enroll in automatic payment so that your loan providers can have their payment debited automatically from your bank account through your credit cards. But you can only make minimum payments through this way.
Get a new credit card:
Get a new account if your bad credit has left you with no credit cards. Many people stop using credit cards once they fall into credit card debt. They think that they will fall back in debt if they start using credit cards again. But avoiding credit cards won’t help you to build your credit score. Using a credit card will help you to build a payment history that will leave a positive impact on your credit score.
But just because you have to get a new credit card that doesn’t mean you have to get a Subprime Credit Card. These credit cards have high interests and extremely high fees. Which will only get you right back in debt. With these types of credit cards you will only ruin your credit rather than building your credit score with it.
Build your credit habit:
One of the biggest contributing factors in improving your credit score is to stay in your credit limit and make a full payment on time. If you are trying to build your credit score then buying things that you cannot afford through your credit cards will only get you back in debts.
To build a better credit habit you must change your lifestyle. Stop buying things you cannot afford, pay just the minimum and stop using credit cards for almost everything. If you keep doing what you used to do then you will only increase your chances of having a bad credit. Rebuild you habits and improve your credit score.
Getting started to improve your bad credit is quite difficult. But once you get the momentum, you will improve your credit score at an exponential rate. Remember, practice makes you perfect. Always stick to your good habits and don’t get hasty with improving your credit score. It won’t happen overnight. Be patient with your work. It will take some time. But with perseverance, commitment and having trust in you will get a there. And before you know it, you can apply for small business loans and get good interest rates and good terms with your excellent credit score. Be persistent and you are sure to succeed.