Credit score, in this day and age, makes for one of the most important criteria for almost any venture we wish to undertake. Be it securing a home loan, or starting a new business venture, the bank analyses the credit score to ensure repayment of the loan.
An individual’s spending habits speak a lot about him as does how soon he repays the money he owes. Moreover, that is what reflects in his credit score; what his lenders focus on when lending him a loan for his business.
See here now how personal credit score reflects upon the circumstances of an individual. How lenders prefer those who pay bills on time, consistently; how this feature is considered low risk by the lenders.
Your business depends on you:
An individual who intends to secure a loan for his business needs to have an excellent credit rating the reason being the individual cannot be separated from his company. Therefore, if you have debt already, then you stand to lose out on loan. Also, if the ratio of debt to income is high, or if you have missed out on repaying an earlier loan, you may not get the loan, at all.
Reasons why your loan may not get approved:
See here how there are quite a few factors that affect your reputation as an individual even though your loan is for a business.
As mentioned above, the debt to income ratio gets inspected and if any irregularity is found, it brings down your chances of getting the loan.
Secondly, if you already have a loan and if you have been late in making the repayments, it reflects on your credit rating. As also, late payments on credit card, even if it’s once a month or on a regular basis, then the bank might refuse the loan.
Late repayments, or missed credit card payments,or loans may put you in the high-risk category, giving the bank reason to think twice before giving you the loan.
And, finally, if you file for bankruptcy, then your chances of a loan are next to impossible. Banks are wary of lending money to someone who may have gone bankrupt even a decade ago for the simple reason that it reflects on their credit score.
This shows how despite running a solo business, you can never be separated from it. You own the business you run, so you are responsible for the credit score, which in turn determines if you can secure a loan for your enterprise. Your assets are directly related to your credit history. So, do remember to maintain a good credit score, repay loans on time and make your credit card payments consistently. You are responsible for the business you run.