I recently applied for a business loan and was told I was ineligible because my credit score was too low. What do I need to do to repair my credit rating?
There is no quick fix to your problem.
However, with patience and self-discipline, there is light at the end of the tunnel.
To begin, order copies of your credit report from the three credit reporting agencies: Experian, Equifax and TransUnion.
You can obtain these reports, free of charge, once every 12 months from each of the credit bureaus, by calling (877) 322-8228 or visit www.annualcreditreport.com.
Order all three, as there might be discrepancies.
Carefully review each report, and notify the respective companies of any errors you might detect.
Fair Isaac Corp. developed the FICO credit score based on payment history. A score of 720 or better will ensure that you receive the most favorable loan interest rate.
Any bank or lending company will expect you to personally guarantee a business loan.
Repairing a poor credit score will take time and patience. Here are some tips that will help you in the process:
• Pay your bills on time. Credit card companies indicate the “pay by” date. You payments must reach them by this date.
• Pay down high-balance credit cards first. You should ideally keep the outstanding balance less than 30 percent of the available credit line.
• Don’t close unused credit cards or open new accounts to increase your credit score.
• If you are in over your head, try to negotiate a manageable payment schedule with your creditors. In the alternative, seek out a legitimate credit counseling service.
• Resolve to live within your means. Construct a budget detailing income and monthly expenses. You might be surprised by how much you spend that you are unable to account for.
Paying off a collection account will not remove it from your credit report. These items may take up to seven years before they no longer show up.
Gray Poehler is a volunteer with the Richmond Chapter of SCORE, Counselors to America’s Small Business. To ask a question or request free business counseling, go towww.Richmond.score.org/mentors. A counselor will respond. Select questions and answers will be featured in Metro Business. To learn more about management issues facing small business and SCORE’s workshops, visit the website or call (804) 771-2400, ext. 131.
