A credit score is a key factor lenders use to determine whether a business is suitable for borrowing. It is calculated based on your company’s credit reports. The relationship is simple: a higher credit score indicates lower risk, while a lower score indicates higher risk. According to Consumer Finance, recent credit activity, among other factors, contributes to a typical credit score.
So, if you’re looking for a loan to start or grow your business, you can also improve your credit score at the same time. Here’s how:
Unsecured Loans
When starting a business, you’ll often look for unsecured lenders. These lenders fund you based solely on your credit history, without requiring collateral. Credit bureaus consider unsecured loans favorable because, without collateral, your business will have a higher asset-to-debt ratio, which positively impacts your credit score.
Credit Lines
A credit line is an additional amount your lender makes available for emergency business needs. To maintain a high credit score:
1. Use only a small portion of your available credit.
2. For example, if your credit line is $50,000, using $40,000 can significantly lower your score.
3. Making regular payments and keeping usage low is key to building a strong credit history.
Installment Loans
Installment loans also play a major role in improving credit scores. If your current score is limiting your ability to get favorable interest rates, adding an installment loan can help.
1. Installment loans generally have higher limits than other loans.
2. Using an installment loan to pay off credit cards or other short-term debts can improve your credit utilization ratio.
3. This can result in a higher score and help you secure better interest rates for future loans.
Looking for a way to increase your business credit score?
At Unsecured Finances, we work with over 400 lenders, helping your business find the funding method that best suits your needs at the lowest possible rates. Contact us today and take the next step toward improving your credit and growing your business.
