QUESTION: I am considering applying for a business loan. Much importance is attached to one’s credit score. Can you offer suggestions to improve my score?
ANSWER: To get started, order a free copy of your credit history from www.annual credit rapport.com. Contrary to claims from other sources, the only place you can receive a free report is from the three credit bureaus, Trans-Union, Experian and Equifax.
Each office is required to provide one copy per year. It’s a good idea to commission a report from all three because they don’t always agree. It’s not uncommon to find errors that can seriously affect your credit score. Be sure to check each entry for accuracy. If you detect an error, inform them immediately.
Your creditors regularly order a copy of your FICO credit score. Scores range from 350 to 850 and a score of at least 720 will give you a better chance of getting a loan at a competitive interest rate.
You can purchase a copy of your FICO score from Experian for a nominal fee. However, many banks and credit card issuers will provide them for free.
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Here are some tips to improve your credit score:
- Compile and prioritize a list of all known monthly expenses.
- Avoid accumulating too many credit cards. Two or three cards are enough.
- Consolidate credit cards and other debts.
- Never overcharge your line of credit. Stay below 50%.
- Contact creditors and try to negotiate more favorable interest rates and payment terms.
- Pay off the debts with the highest interest rates first and make at least the minimum monthly payment on all others.
- Make sure you always pay your bill before the due date. Nothing hurts your credit score more than a late payment.
Remember that each time you open a new account, the creditor pulls a copy of your credit file. Resist the urge to sign up for a store credit card as they promise a discount on your next purchase. Even if you close the account soon after, it can negatively impact your credit score.
Debt management is not as difficult as it sounds, but it does require discipline. Once you’ve figured out your monthly income and expenses, you need to commit to living within your means. SCORE provides a free 12 month cash budget form accessible at https://naples.score.org/resource/12-month-cash-flow-statement
Gray Poehler volunteers with the Richmond chapter of SCORE, Counselors to America’s Small Business. To ask a question or seek free, confidential business advice, visit richmond.score.org/mentors. Learn more about SCORE’s workshops on the website or by calling (804) 350-3569.