Many people have a problem obtaining loans because they don’t know how to establish a good credit score. They find a poor credit score in their credit profile resulting from minor things that they could have avoided. Every lender will not take any risk of providing funds to someone or a business that cannot pay all its debts in time. For instance, late paying of credit, becoming bankrupt and being financially unstable may make the lenders not to lend any money. It is therefore crucial for one to know how to establish and improve his or her credit score. Some of the measures are obvious but can greatly help one to establish a better credit score which will ensure easy access to funds.
Establishment of a good credit score is a process that requires a number of measures that will enable one to prove that the business can pay all its debts within the credit period. The business should start with recording its credit bills and including the name of the business in the bills. The lenders will always want to check whether the business is able to pay all bills within the right time. Once the lenders check the payment of such bills, they then check that the bills have been paid by the business and the business exists. That is why it is essential to include the name and address of the business in such records.
The business account can then be separated from the personal account so that one is able to keep appropriate records that contain the transactions of the business (Arora par.4). The history of business transactions is always required for proving the business’s credit worthiness. All the transactions should be kept in an orderly manner to facilitate the process of evaluation. The use of the credit bureaus helps one to know his credit score information from Equifax and Experian. This will enable him to check on the factors that may be lowering his credit score. There may be other errors in the rating that may arise due to poor judgment by the lender or banks. Getting reports over short periods will ensure that one is able to make corrections in time.
Obtaining a credit card for the business enables it to have a good record of finances. This will also require it to pay all bills on time. One can also take advantage of the points associated with the use of credit cards. For example, the points can be redeemed for cash which make it more attractive.
When one is able pay all his bills on time, it helps him to avoid having any black marks on his credit profile. In fact, paying in advance will help him get a better credit score. Besides getting a good credit score, it is advisable to take advantage of the discounts associated with early payments (Arora par.8). This may result in low costs and therefore high profits in the long run. Let the credit references include the vendors who trade with the business so that they can increase the points in your credit rating.
The business should make sure that it has a good business plan that will provide information about its strengths, weaknesses and what it plans to achieve. The goals of the business will ensure that the lenders understand the business. In order to obtain funds, there should be a reason for the requirement of such funds and a clear explanation on what one intends to do with the funds. The business plan should also be updated from time to time so as to reflect accurate information. It may also be needed when the business wants to expand its operations in future. No lender is willing to take a risk of providing money to a business that has no plans on how well it intends to use such money. It is advisable to have different kinds of debts so that one can get a good credit score (Kadlec par.6).
One should ensure that he only chooses a lender who always reports to the credit bureaus. Having many of such lenders will forward good reports as long as they are paid on time. It cannot be compared to a situation whereby the business is only getting good reports from one lender. Any unused card accounts should not be closed as it may lead to a lower credit score.
It is good to have a long history of the account so that the lenders can know that the business or person is able to maintain the terms that come with the credit rating. Most lenders will use such accounts to determine whether the account is still in operation or not. In case they find that the credit card accounts have been closed, they will know that the business is not able to pay its debts and therefore avoid lending you the funds.
After the establishment of a good credit score, it is also important to improve such credit scores. It is good to know how to improve the credit score as it can give one the advantage of borrowing more funds in future to assist in the expansion of the business. Getting the right information from the credit bureaus on a quarterly basis enables one to know any areas that may be affecting his credit rating.
Many copies of the same may be made from different credit bureaus and the unpaid accounts that have been reported can be checked. All outstanding funds should be paid and ensure that the changes are made as soon as possible by the credit bureaus. Any accounts that have stopped operating previously should be activated and ensure they are improved. In case the business finds that there has been an account that a creditor has recorded without its consent, a report of that information should be sent immediately so that the creditor can make corrections.
If one finds it difficult in trying to make payments on time, then it is good to have an automatic payment to be done by the banks. They can help one to avoid making late payments that will lower your credit score rating. This is the best way for those who may forget to pay their debts as they fall due. For anyone with one credit card, he should make sure that he obtains another credit card but they should not be too many or too few (Dimmitt par.4). This will show how well one is able to manage all accounts and thereby improve his credit rating. The percentage of amounts borrowed should be balanced across all credit cards. It is also good to make small payments with the credit cards, for they can present a good history especially when one maintains a good record of payment of bills in time. I have tried this approach in my personal finances and it has worked well.
One should try as much as possible to reduce all his current balances in the accounts so that he can get a good credit rating. This can be done by increasing the minimum payments from what one has been paying to a higher level. The business should not pay all the amounts due in lump sum; instead it can pay little by little. There should be a priority in maintaining the good records of all payments since doing this little by little is what determines the credit rating in the long run. It is also advisable to have different forms of debts or credit, to increase the credit scores. For example, apart from having personal loans, one should include other secured and unsecured loans. It is good to consider obtaining a gasoline card or a store card because it can be obtained easier than a bank credit card.
In case it becomes difficult to obtain another credit card, one can get a friend who has a good credit score rating to have his name as an authorized user of the account. This does not mean that he has to use the account, but it will enable him to have a better credit score. For one to improve his personal finance, he should always maintain good records by using your credit cards wisely and avoid any unnecessary expenses.
Whatever one is doing at the moment can have a major impact in future. It is advisable to develop a good habit so that one is able to obtain a good harvest. The measures discussed so far enable one to avoid any problems associated with borrowing funds in future. Every business needs funds to start its operations and for expansion purposes at its growth stage.
Works Cited
Arora, Rohit. 8 Steps to a Better Credit Score. 2012. Web.
Dimmitt, James. n.d. 4 Steps to Establishing Good Credit. n.d. Web.
Kadlec,Dan. 5 Ways to Build a Good Credit Score from Scratch. 2011. Web.