It happens sometimes when you don’t have enough credit score to apply for a loan. You try very hard but the lenders and other financial institutes have rules that they have to follow. There can be various reasons that they are not complied to lend you the money. One of that is the credit score is not at the mark when they can give you various term loans.
What is a Bad Credit Score?
In generally credit score is the made when you repay any type of loan. The score can range from 300 to 850 as it depends on the credit report and credit history compiled by the banks and financial institutes. The score helps in determining whether you will get a loan or not. This means if your score is more than 750 then the lender will happily give you the loan. A score of less than 650 is fair but below 500 can cause trouble. It will be considered as a bad credit score.
Reasons of Bad Credit Score Pile up:
When you are running a large business, it is quite possible that you forget to do the following things that can increase the credit score which can transfer it into a bad credit score. So if you are having problems gaining credit scores then these can be the reasons.
Payment made Late:
If you are making late payments it is possible that the late payment fee can contribute to lowering the score. The 35% of the history of your score depends on the repayment and if that is not maintained then it is imaginable that the decrease is there.
No repayment at all:
A defaulter, who doesn’t repay the loan at all can affect the score and turn it into a bad one. Your failure to pay back the amount will raise the money you have to pay and the score decreases.
You are Total Bankrupted:
It may happen that you don’t have any money in the bank or person to repay the loan so you declare that you are bankrupted. This intensely damages your credit score as it may come to a zero.
Tips to Improve a Bad Score:
But you need not to be afraid; there are always ways to upgrade the credit score that is bad or too low to apply for loans;
Track your Report:
Always ask the lender to provide the report every month so that you keep a check on the repayments so that you know how much you have paid, the amount left and the score that you have.
On time payments:
All the payments should be on time, if not before on the due date will be fine. But it is wise that you pay at least a week prior to the due date. If it is possible then pay more than the minimum amount. It will help you in paying the entire amount before time.
Check for disputes:
You need to check for any type of errors that can occur in the report that you are receiving. Discuss whatever the problems that is there in the report with the lenders to avoid any unpleasant encounters.
Don’t Apply for another Loan:
If you are dealing with a loan and it is difficult to keep up then don’t apply for any other as it will increase your problems even further. First, equal the one at hand then go for the other.
Term Loans can be applied:
But it can happen that people who have bad credit can apply for business loans for bad credit. There are mentioned below;
If you are suffering from a bad credit then a short term loan can be applied for. The terms are simple and you can borrow money for a short time of period but the cash you get an assist as it doesn’t require a good credit score.
The different invoices that you get when you deal with other companies and people come in very handy as you can apply for loan giving the lender the invoices of your business and get the money. There are two types of invoice financing; invoice factoring and asset-based loan.
Merchant Cash Advance:
It is the amount that is paid in lump-sum on a set percentage of daily credit cards used. This is the amount paid on the annual sales of the business that is borrowed for.
Short-Term Line of Credit:
The short-term line of credit is when an amount of money is given to a business with only 12 months to repay. The amount that you use is repaid and added to the loan amount, so the amount remains the same but the repay period becomes short.
You can apply for either equipment loaning or leasing. In this, the equipment acts as the credit score. The loan or lease is given against the equipment that you buy. The lender can either allow you to have the equipment or sell it after the term ends.
You can see that there is no need to worry if you have a bad credit score, still, you can apply for term loans. Not only this but also you can avoid things that can affect the score and can make amends to improve it.