When you request a loan to finance your small business, one of the first things a lender will look at is your personal and business credit history. So before you fill out one line of a loan application, make sure you have good credit.
Get your credit report.
The first step is finding out your credit score. Annualcreditreport.com is jointly operated by the three major U.S. credit reporting agencies. American consumers can get up to three free credit reports per year. A score of about 700 is usually required by an outside lender. Many banks use a FICO score instead, and credit scores on that scale usually need to be a bit higher, around 750.
Check your credit report.
Make sure there are no errors or outdated information. The report contains a list of all the credit you’ve obtained in the past, such as credit cards, mortgages, students loans, etc., and your record of repayment. One late payment will not hurt your credit score. Several will. If you’ve had a period of bad credit due to an unusual circumstance, it would be a good idea to include a letter explaining the circumstances with your loan application.
Establish good credit.
Paying off bad debt is only the start of repairing your credit score. You need to establish affordable, positive lines of credit so that you can develop a history of successfully fulfilling your credit obligations. If you need assistance in repairing or building credit, you can find several resources to help you.
Use these resources to build your credit.