How to Check and Repair a Negative Credit Score for Business Loans


How to Check and Repair a Negative Credit Score for Business Loans

Your credit rating plays an important role when you are trying to secure funds for your small business. It’s therefore always a good idea to check and repair your credit to boost your chances of getting funds.

To access information that creditors use to assess your credit, you need to pay a nominal fee. In addition to the basic information, you’ll find factors that work against your credit score.

Here’s all the information that will help you check and fix a negative credit score to understand what business lenders are looking for.

Need a Business Loan but Have a Negative Credit Score? Here are Some Tips

Check Dun & Bradstreet Business Credit Scores

Dun & Bradstreet uses a PAYDEX score to measure a company’s risk. The score is based on payment data either reported to data gathering companies that partner with the bureau or reported directly to the bureau. In addition to this data, Dun & Bradstreet uses a financial stress score and a credit score to recommend how much credit a lender should offer you.

To obtain your PAYDEX number, you need to file for a DUNS number through Dun & Bradstreet’s site. This is free and the bureau should have records of your payments with at least four vendors.

Use Experian

Experian is one of the leading sources of business credit. To help businesses easily obtain their credit score, Experian offers a product called Credit Score report. By accessing this report, you can monitor the health of your business credit and get change alerts.

Unlike other indexes, Credit Score takes multiple factors into account to provide a more comprehensive analysis of your credit.

Understand the FICO SBSS Score

The FICO SBSS, or Fair Isaac Corporation’s Small Business Scoring Service score, has become a key factor in small business funding. Not many small business owners, however, understand what it means and its implications on borrowing.

The FICO SBSS Score is widely used by banks and even alternative lenders. It’s a three-digit number that measures how likely your business is to repay loans. It provides lenders with an efficient, systematized and unbiased measurement of a borrower’s ability to pay.

It’s important to note that the FICO SBSS Score draws information from your personal as well as your business’ financials, which makes it a more comprehensive system.

It’s also quite important to remember that when you apply for an SBA 7(a) loan, you’ll need a FICO SBSS score of at least 140. Otherwise your lender might not even submit your application.

Once you have checked your credit score, you should focus on understanding how to repair credit to apply for a small business loan. The first step is to understand what credit inquiries are and how they impact borrowing.

Learn About Hard Credit Inquiries

Hard inquiries happen when a prospective lender checks your credit report to determine whether or not you are a creditworthy customer. Hard pulls are serious inquiries that are made in advance of lending you a line of credit or loan.

You should note that a hard inquiry becomes part of your credit report, which means anyone who does a hard or soft pull will be able to see the inquiry.

Learn About Soft Credit Inquiries

A soft credit pull does not impact your credit score. If you have ever received a credit card offer in your mail, it’s possible that the company did a soft inquiry to check if you qualify for the card.

Soft pulls occur quite often, but since they do not affect your credit score you need not be too worried about them.

Now that you have a fair understanding of how you can check your credit score, let’s explore how you can fix credit.

The process of credit repair should begin with getting a copy of your business credit report. The report will provide a review of your business credit history and score. Thereafter, you must follow these credit repair steps.

Limit Your Credit Usage

A major factor that affects your credit score is the amount of money you owe to the banks and other lenders. A common metric used to measure your company’s financial leverage is the debt-to-equity ratio. Another metric is credit utilization, which is concerned with available credit in relation to debt. You must focus on keeping your credit utilization below 30 percent.

Don’t Neglect Your Personal Credit Score

Small business lenders like Experian take your personal credit score into account while evaluating your business. It’s therefore important for you to use a credit score analyzer tool to understand how lenders view your personal worthiness.

Monitor Your Credit Score Regularly

To access small business startup loans more easily, you should check your score. Keeping an eye on your score can help you avoid errors and inaccuracies and maintain a good record.

You can find more useful tips on credit fix in this article.

Credit Score Photo via Shutterstock

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Shubhomita Bose


Shubhomita Bose Shubhomita Bose is a Staff Writer for Small Business Trends. She covers key studies and surveys about the small business market, along with general small business news. She draws on 8 years of experience in copywriting, marketing and communications, having worked extensively on creating content for small and medium sized enterprises.

One Reaction

  1. Tom Gazaway

    Surprising that you don’t mention Nav.com. D&B and Experian and FICO SBSS are all good and important but you’d need to go to three different websites to get all of them and they would be far more expensive than getting them all at Nav.com in one place. My company connects all our clients with Nav because it’s the obvious place for a business owner to get all this information and to get it in one place. Additionally, it’s a company with lots of developers making the site better all the time. All your info is good and correct but Nav is the tool that brings it all together and makes the tracking of all the credit moving parts both manageable and affordable.

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