Credit History
When a small business requests a loan, one of the first things a lender looks at is personal and business credit history. So before you even start the process of preparing a loan request, you want to make sure your credit is good.
Get your personal credit report from one of the credit bureaus, such as TransUnion, Equifax, or Experian. You should initiate this step well in advance of seeking a loan. Personal credit reports may contain errors or be out of date, and it can take three to four weeks for errors to be corrected—and it is up to you to see that this happens. You want to make sure that when the lender pulls your credit report, all the errors have been corrected and your history is up to date.
Once you obtain your credit report, check to make sure that all personal information (your name, social security number and address) is correct. Then examine the rest of the report carefully. It contains a list of all the credit you obtained in the past (e.g., credit cards, mortgages, student loans), with information on how you paid that credit. Any item indicating that you have had a problem in paying will be toward the top of the list. These are the credits that may affect your ability to obtain a loan.
If you have been late by a month on an occasional payment, this probably will not adversely affect your credit. But it is likely that you will have difficulty in obtaining a loan if you are continuously late in paying your credit, have a credit that was never paid, have a judgment against you, or have declared bankruptcy in the last seven years.
A person may have a period of bad credit as a result of divorce, medical crisis, or some other significant event. If you can show that your credit was good before and after this event and that you have tried to pay back those debts incurred in the period of bad credit, you should be able to obtain a loan. It is best if you write an explanation of your credit problems and how you have rectified them and attach this to your credit report in your loan package.
Each credit bureau has a slightly different way of presenting your credit information. For example, some use words rather than numbers. Good credits read "Never Late" or "Paid as Agreed." TransUnion uses number and letter combinations. "I" means installment credit, "R" means revolving credit. The key information is in the numbers. A "1" means perfect credit—you’ve always paid your bills on time. "2" or "3" means you have been two to three months late in paying your bills. Too many of theses will hurt your chances in obtaining credit. A "9" means delinquency in paying your bills and a charge off. This could make it difficult to obtain a loan.
You can get specific information on how to read the report from each credit bureau. If you need help in interpreting or evaluating your credit report, ask your accountant or a friendly banker.
Get your personal credit report from one of the credit bureaus, such as TransUnion, Equifax, or Experian. You should initiate this step well in advance of seeking a loan. Personal credit reports may contain errors or be out of date, and it can take three to four weeks for errors to be corrected—and it is up to you to see that this happens. You want to make sure that when the lender pulls your credit report, all the errors have been corrected and your history is up to date.
Once you obtain your credit report, check to make sure that all personal information (your name, social security number and address) is correct. Then examine the rest of the report carefully. It contains a list of all the credit you obtained in the past (e.g., credit cards, mortgages, student loans), with information on how you paid that credit. Any item indicating that you have had a problem in paying will be toward the top of the list. These are the credits that may affect your ability to obtain a loan.
If you have been late by a month on an occasional payment, this probably will not adversely affect your credit. But it is likely that you will have difficulty in obtaining a loan if you are continuously late in paying your credit, have a credit that was never paid, have a judgment against you, or have declared bankruptcy in the last seven years.
A person may have a period of bad credit as a result of divorce, medical crisis, or some other significant event. If you can show that your credit was good before and after this event and that you have tried to pay back those debts incurred in the period of bad credit, you should be able to obtain a loan. It is best if you write an explanation of your credit problems and how you have rectified them and attach this to your credit report in your loan package.
Each credit bureau has a slightly different way of presenting your credit information. For example, some use words rather than numbers. Good credits read "Never Late" or "Paid as Agreed." TransUnion uses number and letter combinations. "I" means installment credit, "R" means revolving credit. The key information is in the numbers. A "1" means perfect credit—you’ve always paid your bills on time. "2" or "3" means you have been two to three months late in paying your bills. Too many of theses will hurt your chances in obtaining credit. A "9" means delinquency in paying your bills and a charge off. This could make it difficult to obtain a loan.
You can get specific information on how to read the report from each credit bureau. If you need help in interpreting or evaluating your credit report, ask your accountant or a friendly banker.