Not everyone knows this, but your personal credit score could make a huge difference if you’re trying to start your own business. As a matter of fact, having a poor personal credit score could negatively affect business loan applications and will be taken into account. Lenders use your personal credit score to gauge how responsible you are with your credit and how much of a risk you’ll be. That’s why it’s always better to have a better personal credit score before launching any endeavor. Here are a few simple ways you can improve your personal credit before you start your business.
Get an Installment Loan
Installment loans are a great way to not only show payment history, but to swallow up credit card debt and lower your debt utilization ratio; both are things that will affect your credit score positively. You can search for online installment loans, and most of them will have a very easy and straightforward application and approval process. Services like Blue Trust, for instance, offer personal installment loans up to $2500 and you could get the money in your bank account as fast as 24 hours after your approval.
Become an Authorized User
Another thing you could do is become an authorized user on someone else’s credit account. What a lot of people don’t know is that when you’re authorized, all the transactions will be reported to your credit report as well, and thus affect your score. But be careful, as bad accounts will be reported as well and can affect you too. So, make sure that you choose someone who’s actually responsible with their finances and ask if they would be open to it.
Get a Secured Credit Card
Secured credit cards are also great for people who are trying to improve or establish their credit. Secured cards are pretty much like any other credit card, with the exception that they are protected by a collateral, which will usually be cash. The limit on your card will usually be the amount you put up.
What’s great about these is that all the information on them will be reported on your credit account just like any card. Be careful about prepaid cards however, as info will not be reported. Once you’ve had your secured card for a while, the issuer will often offer to increase the limit, or upgrade you to a regular credit card.
Call Collections
If you have an account open with a collection’s office, then it would be wise to contact them to try to get a deal. Know that these companies buy debt from companies for pennies on the dollar, so even if they end up getting only half of your total debt, they are still making money. So, try to see if you can work out a deal and make sure that you get an agreement in writing that will be reported and erased once paid.
Having a solid credit score will open plenty of doors for you once you start your business. If you follow a few or all of these tips, you should be able to improve your credit score in no time.
