Good credit scores are an important factor in getting approved for a business loan, according to the U.S. Small Business Administration. For people in their 20s and 30s, especially those planning to engage in a business venture soon, now is a good time to start building a good credit history.
Banks usually grant lending for small businesses, but there are requirements that owners must meet. The earlier you start building your credit scores, the better your chances for a loan approval.
Factors banks often look through are how often you pay your bills, as well as the details in your credit history and your available credit. They may equate a low credit score with poor financial management skills, but that does not automatically disqualify an applicant from applying for a loan.
Here are some ways you can build your credit ratings early.
Pay Rent On Time
Lenders do not only look at your business financial statements and credit history. They also look at your personal finances, so pay your rent on time.
With every on-time payment, you have the opportunity to improve credit score. There are credit bureaus that keep records of rent payments, so you have to ask your landlord to report your payment activity.
Start with Credit Cards
Start building a credit file as soon as possible. If you’re umeploted, you can apply for a credit card geared towards students with a limited history. Establish a history of timely payments as well. By the time you need a loan,you’ll have a good credit score.
Retail credit cards can especially be used to build good credit. While these usually help consumers save money, they often have low credit limits and interest rates.
Make sure not to apply for too many credit cards too soon. This may affect your credit negatively and put you on credit risk. Open credit cards that you know you’ll want to keep and use for a long time, because closing an unwanted credit card account can reflect negatively on your report.
Credit scoring can help banks decide if they should give you a loan, so establish a solid credit rating. This can also help you take out loans if you want to start a business in the future.