When you want to start a business, it can often involve a lot of thinking about money. However, many people start up as entrepreneurs precisely because they have had employment problems or have been running into money trouble. This can mean you have credit issues that you may not think will be relevant to your new business, but which can actually become quite problematic if you don’t do something to resolve them.
Why Good Credit Is Helpful When You Start a Business
Good credit is always useful, but when you want to start a new venture it can be even more valuable. You may need capital to start your business at all, and this may be something you need to seek out from your bank. Even if you look for investment from other sources, a credit check is usually done as investors want to see if you are trustworthy when it comes to money. This may seem a little bit unfair, but there are few ways to judge how much of a risk a new business is and the financial history of the owner is sadly one of the ones most often used.
Even if you don’t need any initial investment, a good credit rating can help you smooth over any cashflow problems by enabling you to get credit cards and other financial products that can allow you to spend money when there is a gap between delivery and client payment. Invoice financing and other products aimed at business owners will also become available to you if you repair your credit, and these can make running a business far less of an uphill struggle.
What If You Have a Bad Credit Rating and Want to Start Up?
A bad credit rating can be repaired, but it can take time. You may not have the luxury of spending years repairing bad credit before you start up, and may decide to go into business anyway. This is not a bad idea, because although you’ll have less ease when it comes to cashflow and finance, you can still manage your business and begin earning some money. However, if you decide to go down this route, it is still well worth simultaneously taking steps to sort out your poor credit rating. This will mean you won’t have so much of a struggle when it comes to getting business finance products in the future, and will be able to reap the rewards of your business more fully.
How to Repair a Bad Credit History
The first step in repairing bad credit is to know what your credit rating currently is. You may suspect you have bad credit because of something that happened years ago and be pleasantly surprised to find that it is actually now neutral. You may think you have good credit because you have never taken out a loan and so never defaulted on anything, but find you have a bad credit rating because the banks don’t know enough about your repayment reliability as you have had no credit. Guessing at your credit rating doesn’t often work, and so it is best to find out where you stand for sure. Even if you failed a credit check for a loan or card, it doesn’t mean your credit rating is terrible necessarily, so find out for sure.
Once you know where you are on the scale of credit, you may want to improve your standing. There are companies who can help you do this, and this website will help you find a good one. Generally, the best way to improve bad credit is by getting credit products aimed at people with a bad credit history and repaying them reliably. A poor credit credit card is often a good starting point. These have low credit limits and high rates of interest, but because the idea is to use it and repay it in full, you can often get away without paying anything for the credit. Use the card as you would the money in your current account. Only spend what you can afford to repay immediately. This will allow you to prove to lenders that you can make consistent and reliable repayments, and will mean they will extend your credit allowance over time to levels that can actually help you with your business.
Keep an Eye on Your Credit Score
While you are making efforts to improve your credit rating with the help of a credit repair company or using low credit rating credit cards, you should monitor things by keeping tabs on your credit score. While these approaches do work, you can’t know how well things are going if you don’t look up your credit score regularly. You can expect it to take as long as two years to get yourself into a good standing, but if the situation isn’t too bad to start with, even a few months of working to improve your credit can have the results you are looking for. This may be enough to enable you to get better deals on business related financial products and also personal finance products that can help you keep things balanced as a newly self employed person.
Credit ratings can affect everything, from what you can borrow to where you can rent. They are an extremely important factor in modern life, and luckily bad credit is something you can do something about. If you have aspirations to start a business, you may need banking products more than you currently expect. Don’t be put off from starting a new venture just because of bad credit, but do look into ways you can improve your credit rating so that as your business grows, you will have more options open to you.
Finance isn’t linear and even some of the world’s best business people have experienced bad credit or bankruptcy, and you can get out of these holes – the important thing is to understand the situation and be willing to take action.