Unlike medicine, when it comes to obtaining a loan to fund a small business, you want your pulse to be as high as possible. Your pulse – or credit score – tells the “story” of your credit history to lenders and they use these numbers to help determine not only credit worthiness, but also interest rate and other loan terms.
That’s why the new standards that went into effect July 1 are welcome news for aspiring entrepreneurs looking for a loan to fund a new business. If you’re not familiar with this news or how the new standards could affect you, read on.
A recent report by the Consumer Financial Protection Bureau (CFPB) outlined a number of problems it found with Experian, TransUnion and Equifax (the three major credit reporting agencies) related to their quality control systems and also how these agencies investigated disputes when consumers reported issues in their files.
The most common credit problems found in a credit reporting file are:
- Charge Offs
- Late Pays
These new rules will require that a majority of civil debts and tax liens will be excluded from the score results and credit scores are likely to go up. Some experts are estimating this news will affect approximately seven percent of the population and could result in as much as 20 points higher credit scores for those consumers. Other proven means of increasing one’s credit score include paying monthly obligations on time and in full, keeping your debt to income ratio low and reviewing your credit report annually to ensure errors are caught and corrected.
In terms of a person’s ability to get a loan to start a new business, these changes are certainly good news. It will help more people obtain the loan(s) they need to start a business.
Tenet Financial Group is here to talk with you about your small business loan needs and how these recent might work in your favor. Give us a call at 888-901-3335 and we’ll show you numerous options and discuss which loan type best suits your situation.