If your low credit score is not allowing you to get your applications for startup business loans approved, you should look for ways to increase it. There can be hundreds of ways to build credit depending on factors that are holding the score down. If your credit score is around the “bad” or “fair” areas, you can use the following methods to bring it up. Read on to know more.
Start Making Frequent Payments
Make multiple small payments (usually referred to as micropayments) all through the month. This will help you to keep the credit card balances down. If you make micropayments, you will be working on the credit factor known as credit utilization. This factor has a strong impact on credit scores.
When you make small payments, your credit utilization will become low. This change will have a positive effect on your score immediately.
Request the Bank/Financial institution to Increase Your Cards’ Credit Limit
When the credit limit on your card increases and the balance remains the same, your credit utilization will automatically decrease. This, in turn, will increase your score. Talk to your credit card issuer and find out whether you are eligible to increase the limit on the card without undergoing any “hard” inquiry (avoiding such inquiries is important as they often decrease credit scores temporarily). Many issuers will be ready to increase the limit right away to make life easier for you.
Check Your Credit Report for Errors and Get Rid of Them
There are several instances where a single mistake on a user’s credit report ends up decreasing his credit score significantly. So, whenever you see that your credit score is low, do check your credit report for mistakes.
People in the United States get a free credit report every year from all the three top credit bureaus, TransUnion, Experian, and Equifax. Collect those reports and find out whether they feature any mistake. Some of the common mistakes found on these reports include:
- Payment marked late even when you made it on time
- Listing of negative information that is more than 10 years old
- Wrong entries about loans
If you are not well-versed with finances, you can seek assistance from a professional to spot mistakes in your credit report. If the report contains any mistakes, dispute them, and have them removed as soon as possible. Credit bureaus get a maximum of 30 days for investigating and responding.
Start Using Secured Credit Cards
This method will allow you to build your credit from scratch to increase your chances of entering the good books of loan lenders.
For your information, a secured credit card requires the cardholder to make a cash deposit to get the card issued. You will need to make the payment upfront and your credit limit will typically be the same as the deposited amount. You will be able to use the card like any other credit card. If you pay the credit card bills on time, your credit score will automatically increase.
Here’s a tip for you- for this method to work, you must pick a secured credit card that submits reports on users’ credit activities to each of the three major credit bureaus.
Keep All Your Credit Cards Running
If you are aiming at improving your credit score, you should never consider closing any of your credit cards. Doing so will make the process more complicated. When you close a card, you are also losing its credit limit. This means your credit utilization will be calculated based on a smaller credit limit, which can decrease your score considerably. So, keep every card you own open and also use them occasionally.
Make Bill Payments on Time
Doing so is necessary as late payments harm our credit score very badly. To be more precise, your payment history is the most powerful factor influencing your credit score. If you make late payments, the information can remain on the credit report for as many as seven years.
If you have missed making a particular payment and 30 days have passed since the bill date, talk to the creditor right away. If possible, make the payment and make sure that the delay/missed payment will not be reported to any of the credit bureaus.
These tips should assist you to build your credit and become eligible for startup loans. An improved credit score will also allow you to enter the good books for various business funding services.