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Smart Ideas: Businesses Revisited

Ways Your Personal Credit Score can Affect Your Business

The business world is highly competitive, and business owners can sometimes feel the fragility of their businesses in this environment. It is very important that you protect your business interests in terms of finances and reputation. If you make one wrong move as a business, then you cannot achieve your business plans and your bottom line can be at stake.

This brings us to the question about your personal credit score. Your business can be affected by the state of your personal credit score. Below are some of the ways that credit score can impact your business.

Your business can be affected by your credit score in a number of ways. Business loans can be affected by your credit score.

When deciding whether to approve a loan applied for by a business, most banks and lender check personal credit scores. It does not matter how well your business is doing, if anyone of the owners has a low credit score, it means that there is a great risk and financial burden to that individual which could affect their business operations. Many loans applications are not approved by financial institutions if there is an individual associated with the company that has a low personal credit score.

There are lending institutions, however, that don’t check on personal credit scores. Some lending institutions will still approve loan applications for businesses who are operating with sustained and consistent cash flow. A business’ history of revenue will be checked to enable them to determine if they will approve the loan application or not.

If you are getting your business finances from individuals like anonymous donors or venture capitalists, your personal credit score will not in any way impact their moves. As long as you have a functional business plan or if you are already doing a steady amount of business, many individuals or investors will grant the loan the you need.

There are people who are not aware of their credit scores. Through free and premium services designed to keep you updated on your credit score, you can actually know your standing.

Credit scores used by businesses and individuals are calculated by three major credit bureaus. They are Experian, TransUnion and Equifax. Their calculations are quite different to each other and they even sometimes show radically different results. Lenders, on their own part, evaluate all three credit ratings before they give approval to your loan.

It is still possible to improve on your credit score if you find it rather low.

Your business and success can greatly be affected by your personal credit score. If you want to make sure that you have access to credit and loans when you need them, make sure to keep your personal finance intact. If you want your business to survive for a long time, take time and effort to rebuild your credit score if it does not look great at this point in time.