Having a poor credit report can affect you in a multitude of different ways. Not only does a poor credit score limit you from borrowing more money in the future, it can also get in the way of finding great jobs, as many employers – especially those working with finances – will run a credit score on job applicants beforehand.
For business owners, a poor credit score can have many implications for both their company and their personal life. If you are in a lot of debt, then keeping up with repayments can become tricky when you start a business, especially if a personal wage isn’t guaranteed for the first few months. Starting a new business when you have a lot of personal outstanding debt puts you at grave risk of your credit score getting even worse due to missed payments and/or collections that can occur as a result.
In addition, if you are hoping to gain business funding in the shape of a loan from your bank, then a bad personal credit score will also heighten your risk of being rejected and having to find alternative methods of getting your business off the ground financially. So, if you are in a lot of debt and are considering starting a new venture as an entrepreneur, the first thing that you need to do before beginning is get your credit score back under control. Here’s how:
Tip #1. Speak to Your Creditors:
If you’re in a bad financial situation when it comes to debt and are considering starting your own business, then it’s important to pre-empt what may happen in the future. Hopefully, your business will start bringing in a great income for you from the start, which you’ll be able to use to finally get rid of the debts hanging over you. However, whilst that would always happen in an ideal world, there’s always the risk that it won’t and your first few months of business could end up causing even more damage to your credit report by leaving you with inadequate funds to continue paying back your debts.
In this case, the best thing to do is speak to your creditors, who’ll be able to work around your situation and come up with an agreement that works for both of you. If you fail to let your creditors know what’s going on, then they’ll likely assume that you’re simply refusing to pay, which could lead to even more complications and you may even have bailiffs at your door. To avoid getting collections on your credit file, get in touch with your creditors and let them know what’s going on. Most will be very understanding and offer you some leeway in order to get your business off the ground, so that you can repay your debt when you are able to. Visit https://creditrepaircompanies.com/collections/ for more information on avoiding collections on your credit score.
Tip #2. Repay What You Can:
If you’re currently paying the minimum amount per month to each of your creditors, then you can expect your debts to be around for a long time. Although paying the minimum amount will keep debt collectors off your back and make sure that your credit score isn’t damaged any further, it also means that you’ll have a financial commitment to uphold for months or even years to come.
To make improvements to your credit score and put yourself in a better personal financial position before you start your business, the best thing to do is go through your credit report and determine which debts you can pay off in full right now. Before you make the payment, contact the creditor – many will offer special debt consolidation deals, and offer you a discount on the final price if you make a lump sum payment to get rid of the debt for good. If you have a large amount of debt that you feel will be impossible to repay using the funding that you have available, then a debt consolidation loan could be a great option for you to consider. A debt consolidation loan is used to pay off the credit that you owe in full, leaving you with one single, more manageable monthly payment to make and less interest to pay compared to multiple lines of credit.
Tip #3. Check Your Credit Report:
There are many ways that you can check your credit report today; a quick online search will bring up several free and paid services that you can use to look at your credit report and each individual factor that affects it. For the most part, you’ll find that your credit score is affected by factors such as the amount of debts that you have, the total amount that you owe, and any past missed or late payments on each of your accounts. If you have had to deal with collection agencies in the past, then this will also damage your score.
However, it’s also important to bear in mind that credit agencies aren’t perfect, and mistakes can be made from time to time. Therefore, it’s important to keep detailed records of your debts. For example, make sure that you know when payments were made and how much you paid off. This way, it will be much easier for you to spot any discrepancies on your credit file, for example if a creditor marks a payment as late when you’re sure that you paid it on time. If you notice anything on your credit score that doesn’t look quite right, the first thing that you should do is get in touch with your creditor and notify them of the issue. It’s also a good idea to provide evidence, such as a bank statement, to prove to the creditor that they’ve made a mistake and make it easier for them to rectify things.
Before you embark on your new business venture, the first thing that you must do is get your personal finances in order. This will make it much easier for you to manage financially in the future, and improve your chances of securing funding for your new company.