Make Your 2010 Business Resolution to Become Credit Worthy!
by TonyaWilson, Former Guest Blogger
- Created: March 24, 2010, 12:03 am
- Updated: March 2, 2012, 7:14 pm
Many entrepreneurs approach us for assistance in seeking funding. They show us their business plan, describe the growth they anticipate by updating their commercial kitchen, purchasing a store front or plead their case on how they need funding to make payroll. Whether that funding is for equipment purchases, real estate or working capital does play a factor in securing financing, however, what matters most is a four letter acronym…“FICO”.
What is “FICO”? Your FICO* (created by the Fair Isaac Corporation) is a statistical analysis that represents your credit worthiness. The FICO score ranges from 300 – 900. There are a few lending programs available that will consider a slightly lower credit score such as the SBA Community Express Program* but to be truly credit worthy you’ll need to have a score of 720 or above. If you already have an established business you have a second opportunity to qualify for financing by utilizing your business' credit history. However, until your business is of significant size, revenue, and longevity your personal credit history will still be considered.
If you aren’t one of the few currently holding a score of 720 or above, there are a few steps you can take to improve your score:
- Pay debts on time
o If you are behind on any debts, get the payments caught up and pay on time going forward. This accounts for about one-third of your score.
- Watch your total indebtedness
o Another one-third of your credit score is made up of your total debt owed, the number of credit lines you have with a balance, and the type of credit accounts you have i.e., mortgage or revolving.
- Maintain a variety of account types.
o Balance higher risk account types with more secure, collateral based.
- Limit opening new credit lines
o The more credit lines you have increases the likelihood a creditor will question your ability to repay a new loan.
Finally, never underestimate the importance of knowing your credit score and making sure all your credit reports are accurate. Be sure to visit www.annualcreditreport.com* once a year to obtain a free credit file disclosure from each of each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion. And make sure to check out and enjoy the annualcreditreport.com video* from the FTC underscoring the benefit of this site. Happy New Year!
You can also find Tonya on twitter at @TonyaWilson.
About the AuthorAs a member of the Ohio SBDC at Columbus State, we provide entrepreneurial development assistance and business consulting to start-up, emerging, and existing business owners. In addition to one-on-on advising, we create, coordinate and promote programs and events to inspire, educate and engage individuals who wish to start or grow a small business.
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