If you have ever had a credit card, taken a loan, or paid off your bills in installments, you possess a credit history. Your credit history is a record of your debts payment behavior, total payments, and several other things.
When you apply for a loan or any other kind of finance, your potential lenders will use credit rating agencies to assess your financial track record and come up with an average score.
This calculation is based on the transactions and other data belonging to your credit history, and is a measure of how risky it might be for a lender to lend you money.
Personal v/s Business Credit Score:
Although your business and personal credit scores are generally different, this distinction might not be very prominent for a lot of new entrepreneurs. This is because initiating a start-up often requires business owners to turn to their personal finances.
We advise that you keep separate credit lines for your personal and business expenses. So, if you are getting a business credit card, avoid naming yourself as a guarantor since, if the business is also in your name, doing so will connect both your personal and business credit history.
How Will My Credit Score Impact My Ability to Secure Finance?
The better your credit rating, the likelier it is that lenders will be willing to offer finance deals to you. Moreover, high credit scores are linked to lower interest rates and generally favorable terms on loans and credit cards.
On the flipside, a low credit score will make it more difficult for you to secure finance, and, if you somehow manage it, you will have to agree to higher rates of interest since you pose a greater risk to lenders.
Final Word:
To sum up, you can still secure a loan even with a less-than-stellar credit score. However, as we mentioned, the loan terms are not going to be very favorable. Before you decide to get a loan, you should calculate the actual cost of borrowing, that is, how much the loan is going to cost you over the entire term. I
If you want to learn more about the ways you can secure business finance and even improve your credit score, feel free to reach out to us.
