When you’re a business owner in a cash crunch — maybe you need some extra capital to make payroll this month, or open a new location — the last thing you want to hear is that your credit score needs a lot of work before you can qualify for a business loan. You may be tempted when you see ads of promise of quick fixes like credit repair companies.
Can you actually raise your personal credit scores 100 points overnight? Not quite. But there are some things you can do to impact your score within days if you time it right.
The First Step: Reality Check
Setting a specific score as a goal is great practice, but the truth is that you may not be able to raise your score as fast as you’d like. The good news, however, is that you may not have to raise your credit score dramatically in order to access better financing. “Sometimes every point counts,” says Gerri Detweiler, business credit expert with Nav. “If there’s something significantly negative hurting your scores, for example, and that information is removed, it’s possible your scores could jump up – especially if your credit is otherwise very strong.”
This is one more reason why it’s crucial to monitor your credit. Even if you make your payments on time, one blunder on your credit report can possibly drop your score. Occasionally, there can be mistakes in reporting. By keeping a close eye on your credit, you can catch these mistakes right away. By catching these problems early and taking the steps to remedy them, you score may not be impacted and you could have access to better financing options.
Option #1: Reduce credit card balances
“It’s also possible to raise your credit score by reducing balances on revolving accounts” Detweiler adds. Because credit utilization accounts for 30% of your overall score, carrying a high balance on your credit accounts can have a negative effect on your score. Paying those accounts down or off can contribute to a healthier credit profile. FICO has reported that consumers with the highest credit scores tend to use less than 10% of their available credit.
Option #2: Disputing Items
As you monitor your credit, you’ll have a higher chance of catching potential reporting mistakes on your credit report. If you find false information on your credit report that is putting a damper on your credit profile or score, you can dispute that information with the bureau. With some patience and by following the dispute procedure and providing paperwork if necessary, you should be able to clean those blemishes off your report and potentially help your score.
Option #3: Leverage Your Business Credit Score & Revenue
If you’re a small business owner with a personal credit score that is still a work in progress, there still may be an option to obtain financing without an extra long wait. If your business can show great revenue numbers and you have a high business credit score, you can obtain business loans or lines of credit. If you’re not sure what your business (or personal) credit score is, you can check it for free with Nav.
A great credit score can qualify you for more desirable credit products. For example, personal and business lines of credit and loans can be secured or unsecured. While secured lines offer more security for both the lender and borrower, along with generally lower interest rates, they also require collateral up front. An unsecured line of credit, while riskier for both parties, can offer great rates for highly qualified customers without the required collateral.
While raising your credit score by 100 points overnight may not be realistic, any effort made to take charge or your score can bring favorable results. By keeping your credit score and profile in shape, you could save time and money and get moving forward with your goals.
This article was originally written on June 7, 2018 and updated on July 2, 2018.