Updated: Feb 25
Credit Scores - Boring & Not That Important?
How often do you check your credit score? Once a month? Yearly? Each time you need to take a loan, contract mobile or something on credit? Most people don’t give credit scores a thought until the day they need to take something out that needs a search, and quite often, that can be too late.
I know, I know, credit isn’t sexy, it’s boring and to be quite honest a little unsettling - but, I hate to be the bearer of bad news - good credit hygiene is important. Especially when It comes to a business start up.
Picture the scene - you've decided to be brave and go self employed. As a practical and level headed individual you spend time researching your market and putting together a business plan. You have worked out your costings and thought about funding. Motivation and confidence is high, this is the start of a new dawn, you just know that this is your time. LETS GO!
You’re out of the gates to get a small business loan. No one is turning down YOUR plan! You can see the seaside mansion already - Get excited Bank Manager, a good thing is about to hit you between the eyes!
Business plan submitted (and loved - just like you knew it would be) they just need to do some checks to formalise things….
Wait , what...REJECTED...oh....low credit score………
Well, that’s some wind knocked from your sails but you’re down, not out. You definitely heard that there are charitable loans available, and you are eligible. Quickly you get applying! You can still sniff the sea air wafting through the open window. Surely a charitable loan isn’t going to end in a refusal.
What?!? YOU ARE KIDDING! REFUSED AGAIN.
What is going on? Why are both mainstream and charitable lenders refusing loans? All you can think is;
WHY HAVE I GOT POOR CREDIT ?
Motivation crashes to rock bottom, you feel that your dreams are shattered before you begin. Off home you go to binge on chocolate digestives and spend an hour eyeing up payday loans. ANYTHING to get you started. The thing is, you don’t really understand what a credit score is, let alone how to get started in sorting yours out.
A pretty picture don’t you think? The sad fact is that this is something that happens all too often, a business ends up as a non starter due to a situation that is quite often avoidable. Possibly the business still goes ahead, but is way behind schedule as you have to take time to sort out the debt or think up a new plan. Or the cost of the only available funding is crippling the business before trading even begins.
So what can you do to ensure you give the best possible start to your business dreams?
Regularly check your score and act on your findings.
Even if you know that you have poor credit, acting immediately allows you to take action get your score to a healthy position to help, not hinder your business goals.
3 Top Tips For A Healthy Credit Score
- Check your score at least monthly. Regularly checking allows you to make sure that all is in order. No incorrect information has been put on your account, you haven't unknowingly missed payments, there is nothing concerning that can damage your score. (Did you know that regularly searching around for the best insurance, mortgage, finance options can have a negative impact on your score)
- Remember that good debt is needed for a healthy score. If you have never taken out debt, it is probable that you don't have the best record going. A good check is based on good credit history. Lenders want to see that you honour your financial commitments and pay whats owed on time, every time. If you have never had anything that needs regular repaying, there is no evidence that you can be trusted. Ensuring you have evidence of debt, that everything is paid on time, sets you up for a top notch credit file. If you think you are unable to make your financial commitment, be sure to get in touch with the company, and discuss your options - BEFORE they put a black mark against your name.
- Get on the electoral roll. A quick win. Ensuring you are registered shows stability. It also makes you easier to find. The easiest thing you can do to positively impact your score.
Keep in mind that it takes roughly three months to improve a score, so by thinking ahead and checking your score from day one, you should have plenty of time to improve your options by the time you are ready to trade. No nasty last minute surprises.
If you find something unusual on your credit report, always remember that you can contact the Financial Ombudsman https://www.financial-ombudsman.org.uk/ who will investigate on your behalf.
Don't suffer in silence, if you know that you have poor credit and debt problems, be brave. Take the first step and find out more about debt management at https://www.nationaldebtline.org