So you’ve decided to apply for a loan to start a business. Congratulations! This is a worrying moment when everything seems to be about to come, and much of it will be new and inexperienced.
However, despite the joy, you have to keep in mind the obstacles that may be encountered along the way. As you know, getting a loan for a business is not that easy and the competition is big enough.
Before you start applying, take into consideration the factors that can affect your potential credit or provide you with favorable terms.
One of these factors is your personal credit history.
We all know the importance of striking a balance between work and private life and learning how to distinguish between the two. However, if you are a small business starter, it is often impossible to do so.
Sometimes you become a business yourself. This means that the various difficulties you are going through in your life can affect your business and vice versa.
However, with proper preparation, you can analyze your options and get the best loan that is right for your business.
Why does credit history matter?
Some entrepreneurs believe that their personal credit history is not able to influence the business because it is not related to it. After all, a good businessman does not allow private life to interfere with business, right?
Unfortunately, this is not true. Most lenders study a person’s credit history to decide whether or not to grant a loan to start or continue a business.
In essence, your credit history shows directly how good it is to handle money, manage your finances, and how trustworthy you are as a loan customer.
If you are not in control of your personal income and expense flow well enough, the lender may conclude that you will not be able to deal with the financial part of the business accordingly.
What can be the consequences of having a negative credit history? In the worst case scenario, you may be denied a loan.
Another option might be to give it to you, but at a high and unfavorable interest rate, because the lender is also risk averse when giving the credit to you.
What can ruin my credit history?
As it turns out, not everyone knows what may be the reasons for having a negative credit history. Let’s look at the most popular ways that can lead to this situation.
• Delayed payments
We do not always deliberately delay payments, sometimes we just forget about them. But as it turns out, this can have negative consequences.
In addition, this category includes not only overdue credit payments, but also utility bills, telephone calls, internet, electricity, etc. Delays accumulate in credit history, damaging it.
When assessing a person’s application, lenders take into account data from various institutions, such as information available in the Insolvency Register.
In addition, attention is paid not only to delays but also to the amount and regularity of payments.
Many may not know this, but if you are a guarantor for someone else who is late, it will negatively affect your credit history. Be careful before making such a commitment!
• Income that does not appear officially
The lender wants to see that your income in the bank account is official, that is, confirmed by an employment contract that you can present if necessary.
• Careful handling of personal loans
This is one of the aspects that can have a negative impact on your credit history. If you’ve made many quick loans that you couldn’t repay on time and therefore had to extend or search for a loan elsewhere, the lender can definitely start to doubt you.
Remember that the loan should not exceed one third of your income.
Can credit history be corrected?
This is very slow. It often takes up to 10 years for a person to cover all payments and delays are cleared from history. If you want to find out your credit history.