How Your Credit History Affects Your Chances of Getting a Business Loan

Your puny credit card may be the answer to your business finance dilemma. Your credit card, along with other business loans, helps increase your credit score if you manage it perfectly. If your business also works with vendors who report to credit institutions, then your scores could increase.

During your non-entrepreneurial years, the use of a credit card under your name, and the management of this credit card, will already create an impact in your credit score. When you get financing for a new car or mortgage for your house, your credit score resets to accommodate your performance with the new financing.

 A start-up company still has no financial background, but lenders and vendors may consider financing the company based on the proprietor’s credit history.

A higher funding from your credit card can help propel your company a long way. As long as you have not missed a payment and you pay the exact amount regularly, lenders will improve your standing and provide financing for the improvement of your business.

However, as it is only personal credit, the loan may be quite limited, but it will grow as your business shows results through its invoices.

How I Keep My Credit Cards Free

In my opinion, credit cards are double-edged swords. They can help you raise your credit scores when you are a bit short, or they can drive you a debt hole that could be difficult to climb back out. However, if you use your credit card carefully, you could avoid great debt because of high interest rates and keep your credit card free. Here are a few ways to do such.

1.     Pay in Full

In my opinion, the convenience of a credit card is not because you could afford to have payment plans for expensive items and services instantly. A credit card is a tool to raise your credit limit and avail for yourself better financial deals with lenders in the future. I always make sure to pay my credit card bills in full. Not only do you avoid debt and raise your credit score, you also avoid the stress of having to worry about your bills later.

2.     Pay on Time

The number one reason I ended up with great debt in the past is because I always skipped the deadline payment date for my credit card. My card had a 5% interest rate at that time. Even for just three months of an additional 5% of my previous bill, it could create a hole in the budget. So pay on time and in full always.

3.     Limit your Purchases

If you apply for a credit card, you will need to use it at least once monthly. I use my credit card to purchase groceries or things that my family only needs. I don’t go overboard and purchase things that I want, such as a new television. Limiting your purchases allows you to fulfil tip number 1 and 2. You could do this more effectively if you write your purchases in a notebook to keep an eye on them.