By admin, September 4, 2017
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Bad credit is one of the biggest threats to a new business, especially a small-scale operation. The term refers to the credit history of an individual or business when shows that the borrower has a low credit score or high credit risk.
People or businesses with high credit risk are thought to be more likely to miss payments to their creditors compared to ones with low credit risk. Businesses with years of high credit card balances, overdue loans, insufficient cash flow, and foreclosures are affected by poor credit. It negatively influences their ability to take on new credit, thus making it difficult for them to operate.
Don’t worry! There’s a way out. It takes a little bit of know-how to fix your credit score and keep your business clear of bad credit, so here are 4helpful tips.
Timely payments of monthly bills are the most important thing to do. Your payment history is a contributing factor in determining your credit score. Consecutively missed payments (by over a month) can add to bad credit. Make sure that all your bills are paid on time including smaller bills like cell phone bills and bigger bills like credit cards.
In the case of new businesses, personal credit history is linked to your business’ credit history. Since the business is new, it won’t have a credit history. So, the lenders will consider your credit information to decide whether to lend you money or not. Therefore, if you’re planning to start a new business or have already started it, then make sure that your personal credit is in a good state.
Too much debt affects your payment habits and thus your credit score. When you have the burden of too many loans, then it becomes difficult for you to make regular payments and missed payments lead to bad credit. To avoid this, monitor your credit card expenses before it crosses the limit. Spend only when it’s necessary and avoid irrelevant expenses.
Your bank balance, savings or emergency fund doesn’t directly affect your credit score. However, it plays a vital role in avoiding late payments and sudden expenses that lead to bad credit. For example, if you get stuck in a situation where you don’t have enough money to pay for your expenses or make payment of your credit card, then an emergency fund can cover up for unexpected expenses.
A healthy credit score is the key to protecting your business from bad credit. But, there are a few important tasks that keep your business clear of poor credit such as timely payment of bills, good personal credit history, sufficient bank balance and no excess loan. Follow these tips to prevent bad credit from affecting your business.
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