Credit Score Explained
You may not have given your credit score much thought, but that little number has the power to rule your financial world. What is it? What does your credit rating mean? Who determines your credit score? Find all these answers and more below and in turn, you can dramatically increase your chances of getting your small business loan approved.
What is A Credit Score?
Essentially, your credit score helps companies to determine your ability and likelihood to pay back money that you borrow. A good credit rating is a signal to lenders and credit card companies that you’re a safe bet; you’ll pay them back on time and you’ll use credit offered responsibly. A bad credit rating shows companies that either you haven’t proven yet that you will repay them or that you have a history of paying late or not at all. These are often referred to as FICO scores or VantageScores, depending on how the score is calculated.
Who Determine Scores?
The three major credit bureaus (TransUnion, Equifax, and Experian) compile your credit history. That information is used to create your credit score, which is essentially a number that rates your creditworthiness. Because each credit bureau does things a little differently, your score is likely to vary depending on which credit reporting agency your lender uses. These credit bureaus are privately owned companies rather than government agencies.
What Do the Numbers Mean?
FICO scores range from 300 to 850, with 300 being the worst possible credit rating and 850 being the best. VantageScores range from 501 to 990. But the higher the number the better. To make this a little simpler you can use this guide to help:
Poor (639 or less)
What Factors Affect Them?
There are several factors that affect your scores. The number of accounts you have open, the length of time you’ve had a credit card or account, and the types of accounts you have are all taken into consideration. Payment history is also very important. Paying on time can help raise scores, but paying late (30 days or more) can have a drastic negative impact. Credit utilization rate (the percentage of credit used compared to credit limits) is an important factor in determining credit ratings, too. Bankruptcies and loan defaults damage scores.
Why is your credit score important when getting a small business loan?
Poor FICO scores oftentimes mean that small business lenders won’t lend you money to expand your business. If they do, interest rates and other fees tend to be high to help companies cover the risk associated with borrowers who haven’t proven they make their payments. People with good credit have access to good business loans that don’t cost as much money. This means that, with a good score, you can save big!
Monitor your credit report regularly and check your scores to help keep your credit on track. Credit scores seem complicated, but the general principles are simple: pay on time, use it wisely.
Other Useful Resources By Plousio
- What is a business loan?
- Credit Score Explained
- Why borrow money to purchase business equipment?
- Business Loan Underwriting Explained
- Interest Rates & Factor Rates Explained
- Why business loans get declined
- Business bank account requirements for loans
- Preparing for a business loan
- Getting approved for a business loan
- How to qualify for a business line of credit?
How Does Plousio Work?
Plousio makes it easy to find a great small business loan with the most competitive rates. Simply answer a few questions, select a lender and fill out our account creation form and you’ll start receiving new offers right away! With 3 easy steps, you can get your death care business funded!
Step #1: Apply online or call 1-508-848-0534
Step #2: Receive the most competitive offers
Step #3: Get funded within 24 ~ 48 hours
Contact a Plousio Funding Adviser Today
If you need help with determining your funding eligibility or preparing application and documents, please contact our funding adviser today. Plousio funding advisers pride themselves in transparency and non-aggressive communication practices. They are not here to make sales quotas, instead, focus on helping you every step along the way of your funding process. In the unlikely event, you do not think that Plousio is the right solution for you, just let us know – No problem! We promise we wont be calling you 5 times a day like some other companies do.