Have Bad Credit? Here’s How to Fix It.

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Do you have poor personal and/or business credit? If so, you may have already encountered challenges that having a bad credit score comes along with. But you may not be aware of some other aspects of your private and professional life that your credit rating can impact. Here are a few examples:

• Renting an apartment– Landlords often run your credit score to determine your eligibility as a renter.

• Getting insurance– While it is different from state to state, insurance premiums are much lower for individuals and businesses with better credit in many places across the country. This includes various types of insurance such as car and homeowners.

• Qualifying for funding– Having a higher credit score gives you much better odds of qualifying for personal and business loans.

• Interest rates and terms– Poor credit will prevent you from getting the lowest interest rates and best terms when you apply for personal or business financing.

• Getting a job– Employers sometimes conduct credit checks on candidates during the hiring process to help them evaluate a potential employee.

4 Basic Steps to Repair Your Bad Credit

Building and maintaining a solid credit score is critical to achieving financial stability for yourself and for your business. Not sure where to begin to fix your credit score? Start with these 4 easy steps:

Step #1: Find Out Where You Stand

Although blissful ignorance may be more enjoyable, you can’t improve your credit score until you know exactly where you stand. It’s time to pull off that Band-Aid and start on the road to recovery by getting a copy of your personal and business credit reports. Here’s how:

• Personal Credit Report:

Federal law requires each of the 3 major consumer credit reporting companies (Equifax, Experian, and TransUnion) to provide you with a free personal credit report every 12 months when requested. (Visit AnnualCreditReport.com to get yours.) You can either choose to request reports from all 3 agencies at once, or you can decide to order one at a time. If you have poor credit, you may want to do one at a time so that you have frequent monitoring of your credit score every quarter.

• Business Credit Report:

Unlike your personal credit report, which you can access free of charge, your business credit report unfortunately costs money. The price varies from agency to agency, but starts at roughly $40. The most common business credit reporting agencies that can create a report for your business are Dun & Bradstreet, Experian, and Equifax.

Step #2: Review Credit Reports in Detail and File Any Necessary Disputes

Once you have a copy of your credit report, review it closely. Look out for anything suspicious, or something that doesn’t look right such as:

• Incorrect or outdated information (i.e., address, social security or EIN number, phone number, name, etc.
• Accounts that are duplicate or do not belong to you/your business.
• Fraudulent activity such as companies who have pulled your credit report without your authorization.
• A payment being listed as late although you’ve paid on time.
• Incorrect balances or credit limits.

If you find something that isn’t accurate, contact the credit reporting company to file a dispute.

Step #3: Lower Your Credit Utilization Rate

Your credit utilization rate can be calculated by checking the amount of money you owe on all of your accounts divided by your total available credit. Let’s say you owe a combined total of $10,000 and your total available credit is $40,000. This would make your credit utilization rate 25%. As we mentioned in a previous blog post, you should always aim to keep your credit utilization at 30% or less of your total credit limit. This is the ideal number recommended by most credit reporting agencies and financial experts. Anything higher than the 30% threshold could adversely affect your credit score.

The best way to lower your credit utilization rate is to pay down your balance whenever possible. But if that isn’t a feasible option, you can lower your credit utilization ratio by increasing your total available credit. Two simple ways to accomplish this are by opening up new credit cards or lines of credit, or by contacting your credit card companies to see if you can get your credit limits increased.

Step #4: Pay Your Bills on Time

One late payment can make a big difference on your credit score. Try to develop good credit habits by avoiding late payments. If you struggle to keep track of when your payments are due, consider the following tips:

• Create calendar reminders to help you remember to log in and make a payment.
• Set up autopay with your bank account so that you ensure that you always pay on time.
• Sign up for email or text message alerts from your credit card company.

Don’t have a great credit score, but need capital for your business?

As leaders in small business funding, we understand that there’s more to you and your business than your credit score. With us, you’ll get a personalized financing option, no matter the industry or credit score. Contact us today to learn more.

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