• Sarah Barker

Before you get a business loan, check your credit! Tips to getting your credit score up.

Updated: Sep 9, 2019



If you are considering taking out a business loan for purchasing a franchise, they will review your credit. The higher your credit the better odds you will have in not only getting a loan but qualifying for the best rates. Before you consider a business loan here are some tips and tricks to prepare.


Run a free credit report- Equifax, Transunion, Experian are the top three most lenders use. You have the right to a free report once a year. You can ask this to be mailed to you or get an electric copy through various websites. A simple Google search will aid in finding ways to receive your report. Before you even consider buying a business if you aren't self funding, know your FICO score. The report will give you detailed information on how to read it and what it is reporting.


Get a credit monitoring program - With the age of identity theft, there are an abundance of these programs and they are affordable too. These programs are designed to alert you whenever there is a change being reported to your credit, good or bad.


Dispute Negative Marks & Incorrect Charges - Check each account line by line for accounts you didn't open, charges you didn't make, and delinquencies you didn't cause. Do you have unpaid debt, pay or work with the company to get it resolved promptly. If there is inaccuracies contact the credit bureau in writing about the mistake, send this certified with copies of information to back up your claim. You can also have an added statement to your report, explaining what happened during the delinquency too. For example if you had a series of late pays but you were in the hospital or out of the country, you could have that statement put There are sample dispute letters online and website advising on how to do this. If the information is true you can negotiate removal of these items on your report or work to correct it through working with the creditor.


Pay down balances - Specifically credit cards. Getting your balances below 30% of the credit limit on each card. This is a big one, you don't want to appear overextended. Make sure to use your cards lightly, racking up huge charges can really hurt your score.


Keep old cards active- It's often instinct to want to close these inactive cards, but don't! If possible use it every few months for small purchases and pay it off when the statement comes. The FICO formula can give these a lot more weight when getting your score up.


Don't consolidate accounts - It's best to have smaller balances on a few cards than a large balance on one. Remember the 30% rule from above.


Make on time payments - Consider having all of your payments set up on auto pay, having 6 months of consistently paying your bills on time can have tremendous impact on your FICO score.


Revolving credit - Have at least 2 credit cards, if you have "baby credit" or bad credit then consider getting a secured line of credit to show good faith with a lender. I personally love credit unions and recommend talking to them about your options. Remember to do this in advance of a big purchase. Applying for a bunch of cards and then applying for a business loan isn't going to do the trick. You are typically looking a 6 mo or more depending on your credit to really bump your score.


Understanding your FICO - This is your credit worthiness score, a mathematical equation that tells the lenders how likely you are to pay back your loan. Get to know and understand what this means.


It will be based on:

Time/late payments

How long you have had credit

Credit availability vs. used

Length of time you have lived at your current residence

Derogatory information


What your FICO score mean-

Basic breakdown of the score:

  • 750+ - Excellent

  • 720 and above - Good

  • 660 to 720 - Acceptable (this range and higher is typically where you need to be for business loans)

  • 620 to 660 - Below Average

  • 620 and less - Poor


These are some of the bigger tips and tricks and it's a vague overview of repairing credit. There are many articles on the subject online you can research. Lenders will look at an application on a case by case basis. My best advice is to pick a lender you want to work with and talk to them in advance about what you need to do, to be in an optimal place for receiving a loan. Sometimes you are already in that spot, other times it will take months or even longer. When it comes to buying a business I recommend you work with your franchise consultant to get a pre-approval first before looking in to buying a franchise so you don't spin your wheels looking at businesses that won't be a fit financially.



About Me:

SSB Franchise Consulting offers one-stop shopping when you are searching for a business to call your own. I help you save time by working with you to learn your likes and dislikes and style of doing business then matching you with prospective Franchisors at no cost to you. To read more on if we're a good fit go to https://www.ssbconsulting.us/faq

Ready to get started? Schedule your free consultation today!

Sarah@ssbconsulting.us

SSBConsulting.us


Ready to get started? Schedule your free consultation today!

Sarah@ssbconsulting.us

SSBConsulting.us

 

 

 

 

 

Sarah Barker | SSB Consulting

Franchise Consultant  & Recruiting Specialist

Located in Boise, ID, but I work with clients in all states.

            208.724.1731

           Sarah@SSBconsulting.us

 

 

 

 

 

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