If you find yourself with lower-tiered credit, you may feel like it is impossible to climb out of your current situation. However, there are a few easy steps you can take to bring your credit back up to where you can acquire low-rate loans and exceptional financing terms. Most of the steps involve having some sort of outstanding debt already because the best way to bring your credit up is to prove to lenders that you are credit-worthy.
Your business will most likely have financing or working capital needs down the road, and this is why it is important to focus on bringing your credit up, so you can be ready for these needs. Setting a personal goal to have graduated to a lower cost loan product by the time you need financing again is a good way to keep yourself on track when trying to bring up your credit. That being said, if you do want to graduate to a lower cost product, you need to be a very responsible borrower. Here are some things you must accomplish in order to help your credit and give you the best chance of having more favorable loan terms in the future
Paying on time.
This is the most important step. Not only will this build a good relationship with that lender, but these on-time payments will have a great effect on your credit score.
Build up your total bank balance.
Your average bank balance is something almost every lender will care about. If your goal is a lower cost loan, then spend some time padding up your bank balance and making sure you don’t have overdrafts.
Sign up for a credit monitoring service.
Don’t just assume your credit score is improving — ensure it. By signing up for a free credit monitoring service like Credit Karma, you can make sure your score starts crawling up. Even better, Credit Karma breaks down where your score needs help, so you’ll walk away with other tips to get your score up. You don’t want to find yourself in a pinch for financing, only to realize that you have been declined for financing due to inaccurate reports on your credit report. You should check this at least once a month.
Stay in business.
This one may seem obvious, but it really matters. The longer you are in business, the better loan options you will have. In fact, if nothing else changed about your loan application except your time in business, that alone could unlock a few new loan options.
These are just a few ways you can prep yourself for a better financing option next time around. Of course, there are other things you can focus on, such as building your revenues or becoming profitable, but chances are, as a savvy business owner, those are already at the top of your list.