What is a Credit Score: The most commonly known credit score is the FICO
score developed by the Fair Isaacs Company. FICO scores range from 300 to 850,
the higher the number the better the score. A credit score below 650 may make
it more difficult to obtain a loan. Business lenders look to a business
borrower’s personal credit as an important indicator of creditworthiness,
basically how well do you manage your finances. The higher your score, the
better your chances of getting a loan on favorable terms.
How Your Credit Score is Determined: The credit score is determined
by using the information contained in your , primarily your payment history, credit
utilization (ratio of outstanding debt to available credit), length of credit
history, type and mix of credit, and number of credit inquiries. The most
heavily weighted factors are payment history, credit utilization and length of
What are Credit Reports: There are essentially three different credit
bureaus each issuing a report on your credit, Equifax, Experian and Trans
Union. They gather and compile information about you from vendors, credit card
companies, lenders, landlords etc. Your credit report may contain the following
information: your name and address, credit card account balances, installment
loans, mortgage loans, bankruptcies, foreclosures, collection accounts, closed
accounts, charge offs, credit inquiries and payment history for your accounts
How to Improve Your Score and Keep it High.
- Obtain and Review Copies of Your Credit Reports – You should obtain copies of your credit reports
from all 3 credit reporting agencies (they may differ in the information
provided), examine the reports for any errors or discrepancies and if you find
them contact the agency and have them correct the errors. You are entitled to
receive a free copy of your credit report from each of the three credit
reporting companies every 12 months (
- Pay your bills on time – As stated above; payment history is one of the most heavily
weighted factors in determining your credit score. Late payments stay on your
credit report for up to seven years. Charge-Offs, liens and Bankruptcies will
have a material adverse effect on your credit score.
- Keep your credit utilization low – Carrying high balances in relation to your
maximum available credit will negatively affect your credit score. When you use
your credit cards maintaining balances of no more than 30% of available credit
maximums are helpful. As of rule of thumb use the following scale. Paying off
balances in full every month will give the best results. Making just the
minimum interest payments will reflect poorly in your score.
- Keep Your Credit Cards to a minimum – Credit scores will be adversely affected for
individuals with too many credit cards with either large amounts of credit
available or with high balances. Keep this in mind as you evaluate that next
‘Free Flight’ offer.
- Credit Mix & Length of Credit History – The longer your credit history the better
(assuming you’ve been using your credit responsibly) which is logical since
bankers like to see a track record. Also having different types of credit
accounts is also a positive factor.
- Minimize Applications for Credit – Credit agencies record every time you formally
apply for credit (when you give the bank authorization to pull your credit)
counting it as an ‘inquiry’ and too many inquiries can have a negative impact
on your score. By using BoeFly, borrowers and lenders can get comfortable by
connecting and the formal application process typically occurs only after both
borrower and lenders have agreed to the loan terms.
Article written by BoeFly
About the author:About BoeFly revolutionizes how deals get done by seamlessly connecting all parties, including lenders, borrowers, investors, buyers and sellers to a potential transaction and facilitating the efficient completion of these transactions. BoeFly is a subscription service and does not charge any transaction fees. BoeFly was founded by small business owners and small business lending experts with extensive banking and secondary market experience. The company is privately-held and is based in New York City.