When it comes to business financing, your FICO score is critical. This three-digit number, which ranges from 300 to 850, tells lenders how likely you are to repay a loan. Your FICO score is based on factors such as payment history, credit utilization rate and the amount of debt you have in relation to available credit. A good FICO score can help secure better terms for a loan or line of credit while a poor score may leave you with fewer options or higher interest rates.
Loan Approvals
Your FICO score is the most important factor in determining whether or not you can get approved for a loan. Lenders use your credit score to evaluate your current level of creditworthiness and make an educated decision about whether or not they will extend financing to your business. Generally, lenders prefer applicants with excellent FICO scores (750-850) and may require applicants with lower scores to provide additional security or a larger down payment.
Getting Better Terms and Interest Rates
Having a good FICO score is also important for getting the best terms on your loan. A higher score can mean better interest rates, longer repayment periods, and more financing options. On the converse side, having a poor FICO score can make it difficult to get approved and disqualify you from certain loan products altogether.
Monitor Your Credit Report
Improving your FICO score is essential if you want to secure the best financing options. The first step is to ensure that all of your credit reports are accurate, as mistakes can lower your score. Check each of the three major reporting bureaus (Experian, TransUnion, and Equifax) for any inaccuracies or missed payments. You should also aim to reduce your debt-to-credit ratio and make sure all of your bills are paid on time. Finally, consider taking out a small loan and making timely payments to build up your creditworthiness over time.
In conclusion, having a good FICO score can make the difference between getting approved for a loan with favorable terms and being denied altogether. It is important to take steps to improve your score if it is not already where you want it to be. With diligence and patience, you can achieve the creditworthiness required to obtain financing that works in your favor. Monterey Commercial Capital offers a wide range of financing that is not dependent on FICO scores. Contact our offices today to explore your options.