Your credit score can make the difference between being approved or denied for a credit. By definition, a credit score is a small string of numbers generated by an algorithm and used to predict credit delinquency. There are numerous credit-scoring models out there; however, the one that dominates the market right now is the FICO credit score. The FICO score ranges between 300 and 850 – the first being the worst and the latter the best – and is calculated using the consumer’s payment history, amounts owned, length of credit history, new credit and types of credit used.
The Advantages of a High Credit Score for Small Business Owners
One of the most important advantages to having a high credit score is loan eligibility, which is often imperative for many small businesses. For new small business owners, the personal credit score plays an important role in their interest rates and eligibility. If the business is less than three years old, most money lenders don’t make any difference between your private score and your business’ credit history. Having a high credit score is also advantageous in the job market because many employers do credit checks before hiring a new employee, especially high level employers.
How to Improve Your Credit Score
Here are a few things that you can do to improve your credit score:
• Pay all of your bills on time. Payment history is one of the most important “ingredients” that determines your credit score. If you are 30 days past due on a loan or credit card, your credit score suffers.
• Have a stable job and/or reside at the same address for an extended period of time. Even though not many people know this, you can raise your credit score by working at the same place and/or living at the same address for an extended period of time.
• In the event that you have problems meeting your debt payments, it’s better to talk with your creditors than to ignore them.