Debt Consolidation and 9 Ways of Improving Your Business Credit Score

David Wicks

November 17, 2016

	Not rated
	Rate:

Having bad credit is a bad thing for any business owner. Your high dreams of expanding your business and growing your profit margins get drowned when you are unable to repay your unsecured and even secured loans.

Debt consolidation is an effective debt management process that involves taking up a loan to repay all your existing loans then remaining with one loan to service. This is an effective strategy when you have many debts to repay monthly, but your repayment ability is low.

Businesses that qualify for debt consolidation have a good credit score but taking the loan has negative effects on your credit score especially of you are unable to repay your monthly obligations within the stipulated time. High balances on loans and on your credit cards and credit that are close to or the ones that surpass the credit limits have been shown to increase your chances of having a bad credit score.

After taking a debt consolidation plan, even when you have a good credit score, your score may dip if your business plunges into more debt. You can however manage or improve your credit score in the following ways:

1. Find out the item hurting your credit

The first step of resolving a problem is by identifying the cause of the problem. If your business’ credit score is bad, get to the credit bureau and ask for your credit history and a comprehensive credit report. Eventually, you may find that you have high credit utilizations, you have been delinquent on some accounts, or you have few accounts, the latter magnifies the look on credit score.

2. Turn the negatives around

Negative balances and very low credit scores result from past delinquencies that you must iron out if you need to improve your credit score. Once you have paid up your past balances and the accrued interests, top up your accounts. A positive figure on your credit report and a sign that you are saving some more money turns your score around.

Basically, you earn back the trust of the lenders and they will give you a good report. A good way of doing this is opening a new account with a good positive figure that will be used as a reference point by the credit bureau.

3. Diversify your credits

A good credit score isn’t determined by you having few credit accounts but by having a number of credit accounts and being determined to repay the debts in time. Debt consolidation is offered to people with multiple account balances and who show that they have been repaying their debts but they just got into a crisis and they need to be relieved from the debt crisis.

When you have a mix of credits, it is easier for you to get a loan and to have a good credit score. The variety also shows that you have experience with different types of accounts. Ahistory showing good management of installment and credit card debts tells borrowers that you are better to deal with, a better risk to take.

4. Use old accounts

Your business could have a few newly opened accounts with negative or even positive balances, but these will only give you a low credit score. How old is your credit history? Did you know that your credit history’s age comprises 15% of the score you receive?

Let your credit accounts grow old and keep them active periodically. An old but dormant credit account may be ignored by the credit bureau. You should however open relevant credit accounts since too many credit accounts will dilute your score.

You can have easy debt consolidation for bad credits if your old accounts are viable and they show a high credit score.

5. Lower your high credit utilization attempts

When you have high credit utilization, your business balances on loans and credit cards are high in relation to your credit limit. The best way of lowering your utilization is by paying all your balances and/or transferring some of the huge balances to accounts with no balance. Though credit transfers keep your credit scores safe, you will also have factors in the transfer costs. A good credit score reads less than 30% of your credit limit.

6. Don’t rush the credit inquiries

Credit enquiries stay on your credit records for about 2 years even though they affect your credit for 12 months. The inquiries also contribute to about 10% of your credit score, though it seems low, this value will lower your credit score significantly if you make many inquiries.

7. Be patient

This may seem like a weird and an unreasonable tip when your business finances are at stake, but it is an important strategy. Having caught up with your delinquent accounts, paid your bills in time, and reducing the amount of your balances, you may realize that your credit score takes time to go up. This is just and you should give your account a few months to recover.

8. Ensure that the bureau keeps the right balance

Your credit limit information may be exaggerated because of human and technical errors. If reported inaccurately, you will have your account reading a higher limit than the actual one and this will cost you a lot. You should therefore check with the credit bureau periodically to ensure that the records kept represent your actual financial situation.

You should work hard to have the negative information on your credit limit expunged. This will be a tough challenge, but you will have to dispute the entries and have them deleted from your account.

9. Borrow what you can afford

The best way to rebuild your credit involves charging what you can afford. This will make it possible for future lenders and creditors to give you loans. When charging what you can afford, you will avoid excess debt and you will have a good credit.

In conclusion, a good credit score determines a lot of your financial issues. You will not be able to get a debt consolidation loan when you have a poor credit score, and this could mean going down the high road of bankruptcy. The above listed steps and tips will help you build a good credit to get loans and they will make it easier for a debt consolidation firm to consider you for the loan.