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If you’ve been diligent about making your debt payments on time and in full over the years, your credit is probably pretty good. And while your scores may differ slightly among the three major credit reporting agencies—Transunion, Equifax, and Experian—a good score at one usually means you’ll have a good score at all three, unless there’s a serious reporting error.
If you have a 700 credit score (or better), your responsible credit habits could pay off big time when you’re looking for business financing. Here’s how.
When you launch a business and apply for business financing, lenders often look at your personal credit history and review your credit score, because your business won’t yet have a record of good or bad credit management.
Having a 700 personal credit score might benefit you in terms of financing choices, rates, and terms, since your good score will prove that you’re a lower risk borrower. The flexibility to choose from a variety of business financing options at a lower rate and with more favorable payment terms is important when it comes to business credit, especially when you’re starting out and experiencing uneven cash flow.
If you’ve done any research on business financing, you’ve probably come across Small Business Administration loans. Maybe you’ve heard about how hard they are to qualify for. A long list of requirements and a lengthy application process discourages many aspiring entrepreneurs from even applying.
But with a 700 credit score and a willingness to tackle the business loan application process, you just might find that you do qualify for these low-rate, long-term government-backed loans. Check out the variety of SBA real estate loans and other SBA loan programs to see if they fit your needs—you could have a chance to save money on your business credit.
A good personal credit score also boosts the chances of getting a traditional business loan from a bank, especially if you haven’t established a business credit score and history. And with a 700 credit score, chances are good that you won’t need even need a co-signer.
A bank business loan—which also has the reputation of being somewhat difficult to qualify for—could be both a moneysaver and timesaver for busy business owners, since your personal and business credit are all in one place. And your credit score will help you qualify for a lower rate and longer term loan than you could get from an alternative funding source, which means your monthly payments could be lower than they would for a shorter term loan.
So maybe you don’t want to give your bank or credit union your business loan business—and that’s okay. Your 700 credit score could still help you get a better deal from alternative lenders, since most of them take personal credit scores into account when underwriting loan applications.
While alternative lending often gets associated with loaning money to high-risk borrowers at expensive rates, a good credit score could translate to a sweet deal from one of these lenders. To see what you might qualify for, try our handy loan comparison tool here.
Small business owners who find that business loan applications are too time consuming and complicated might turn to credit cards to finance their business. And those business owners with a 700 credit score or better might soon find they qualify for some of the lowest rate credit cards around. Basically, good or great credit gives you more credit card options to choose from: you may have a choice between a variety of rewards cards, cash back cards, or low rate cards.
In fact, recent data shows that borrowers with “excellent” credit scores (of 720 and up) carry an average interest rate of 13.66% as of April, 2016, compared to an average interest rate of 18.76% for borrowers with “bad” credit.
Keep an eye on your credit details and your score with an annual free credit report from Annualcreditreport, or sign up for a free credit monitoring site like Credit Karma to track your credit score monthly and make sure it stays good enough to get the best borrowing deals for your small business.