When you’re doing the groundwork to get your new business up and running, one of the major considerations is how to structure your financial requirements.
Most new businesses will require some form of credit from a financial institution – whether that’s as simple as a credit card or an overdraft, or something a bit more complicated such as a revolving credit facility or invoice finance.
Before agreeing to provide you with credit, the financial institution will run a credit check on you as part of their assessment as to whether you are a sound credit risk.
If you’ve never borrowed any money before, then you may not yet have established a credit history. This can cause financial institutions some concern as they have no track record to assess you against.
However if you have borrowed money before and don’t have a great track record in managing your finances, then this can be a deal breaker when it comes to new credit applications.
Check your current credit score
There are a number of free online tools available that will tell you the kind of information that will be shown to a financial institution as part of their assessment process. If your credit score looks weak, there are a number of steps you can take to try and improve it. Improving your credit score takes time, so this is something you need to be addressing well in advance of lodging any credit applications.
Errors in your credit score
If your initial search of your credit history reveals some obvious errors, you can dispute these and attempt to have your credit history corrected. Credit repair services may be of assistance in this process.
Consolidate your debt
One of easiest steps to take is to consolidate your existing loans. If you’ve got a number of different credit cards or small loans, this can have a negative impact on your credit score. Consolidating your debt will simplify your financial affairs and potentially reduce the fees and charges that you’ll need to pay.
Demonstrate sound financial management
Financial institutions will be looking to see that you have a demonstrated track record of paying your obligations on time. If you regularly miss payments, or get behind on paying back your loans, then this will count against you when it comes to assessing future payments.
Even if your credit score is not as strong as you need it to be, the important thing is to get started on the road to sound financial management. The longer you delay taking the steps you need, the longer it will be until your credit score returns to a healthy state.