Your FICO Score and Small Business Loans

Your FICO score is kept by one metric across three bureaus and will affect many aspects of your small business loan. Developed by Fair Isaac Corporation (FICO), the metric evaluates your financial health depending on an array of factors. When you seek any type of loan, this score is the primary tool used to evaluate whether you are worth of receiving the loan and at what rate.

Factors in Your FICO

Your FICO score measure how much credit you have, how long you have had it, and how you have managed your debt. How much credit you have means your total limits, number of cards and also the types of loans (it is best to mix revolving and installment) you have received and/or paid off. It is best to have fairly high limits but use only a portion of them. The longer you have had established credit, the better. Finally, the way you have managed your credit is shown through any late payments, missed payments or defaults. A good FICO score is 700. 650 may be acceptable, and 750 is strong.

The Three Bureaus


Your FICO score is reported by three credit bureaus, Equifax, Experian, and TransUnion. Since they all use the FICO model, your score should be consistent across the board. At times you will notice a slight difference between the bureaus' reports. You should take note of any large differences, though, because they could signify a false report. Monitoring your score across all three bureaus is essential to protecting yourself against fraud. You should also have an idea of your credit score before applying for any loan. This will help you understand what interest rate you can expect to be charged.  

Finding Your FICO Score

There are a number of simple, inexpensive resources that allow you to find your credit score today. You can request a report directly from the bureaus for a nominal fee. For about $20 a month, you can request to see your score an unlimited number of times and monitor your score through email alerts. If you are looking to locate your score across all three bureaus, try using a service like FreeCreditReport.com. Be wary of hidden fees with these services as they are rarely free. You may also use many free, online credit estimators. These tools ask a series of questions that will give you a range of possible scores.

How your FICO Score Affects your Loan

Small business loans are extended based on a few factors, and your FICO score will be one of those. Your score will show the lender how worthy you are of a new loan based on how you have performed with past loans. Other factors will be the soundness of your business plan, any collateral you can provide, and any independent financing you have been able to locate. Based on these factors, the lender will determine how much they are willing to provide and at what interest rate. Working to improve your FICO score in the years leading up to your loan will yield you a lower interest rate.