Credit Bureaus and Business Loans

Your company's credit may affect your ability to obtain business loan, much in the same way your personal credit rating affects your ability to get a home mortgage or a car loan.  Before applying for a business loan here are some things to consider.

Business Loans and Credit Bureaus

Three major credit reporting bureaus in the U.S. capture a wealth of information about every individual who applies for personal, business or commercial loans, leases or buys a car, applies for a mortgage or rents an apartment, a job, buys a dishwasher on credit, and numerous other touch points. The agencies are TransUnion, Experian and Equifax. The success (or failure) of your application for a business loan depends, in part, on your credit score.

What Affects Your Business's Credit Score?

What affects your credit score? Paying your bills on time is the number one factor, and this means every time. Next is how much you owe to creditors compared with the amount of credit you have available. Finally, how long you've had credit is taken into consideration. The longer you've had it, the better. Your credit score is not affected by your age, race, sex, employer name, your title, salary, or where you live. Credit checks will reveal any arrests, bankruptcy, civil suits, and anyone who has ordered a check of your credit - like mortgage companies, banks, prospective employers and others. Your application for a credit business loan can be affected by negatives in your credit history.

What Credit Score Do You Need?

To receive favorable consideration in a credit business loan, a credit score of 700 or higher is required. While this score may sound impossibly high, it is achievable. It takes some time and planning to accomplish, but it may mean the difference between getting or getting turned down for the loan you need for your business.

How to Improve Your Prospects for Business Financing

Knowing that the credit agencies amass such detail critical to your ability to obtain needed funds for your business, strive to stay on top of every dollar you owe.

  • First of all, get annual copies of your credit report from each of the three agencies. You can obtain these for free once per year through Annual Credit Report.
  • Clean up any past discrepancies that you find and work diligently to improve your on-time payment record.
  • Shred credit card applications that come through the mail, and don't apply for any new credit cards if you're planning to obtain a credit business loan or commercial loan in the near future.
  • Pay down those higher-interest credit cards.
  • Spread payments across several credit cards.
  • Allow 6 to 18 months to improve your credit - before you apply for that commercial loan.