The Benefits of Having a Good Business Credit Score

It is an established fact that banks and financial lenders look at your personal credit score before extending a home loan or issuing a credit card to you. But did you know that credit scores apply to businesses as well? Well, just like individuals, businesses are also entities that buy, sell, require loans and hence, can be assigned credit scores too. The score for businesses is called Business Credit Score. This score is a determination of the company’s creditworthiness or the likelihood to pay back loans.  Similar to a personal credit report, a business credit report gives a snapshot of various credit facilities availed by the business and repayment history on each of these facilities to the bank. Business Credit Score is calculated on various parameters such as profits of the business, turnover of the business, financial activities of the business and many such details of the business that determines the credibility.

Benefits of having a good business credit score

1. You will receive a better loan term

Businesses have many options to obtain financing including banks and other financial lenders. You qualify for a business loan when you are one of the following:

•         Private Limited or Limited Company
•          Partnership or Proprietorship Company
•         Chartered Accountant
•       Self Employed Professional

When you have a good personal credit score, you are most eligible to receive loans easily and even at a lower interest rate. The same applies to a business credit score. In India, the business credit score varies from 300 to 900. When your business credit score is more than 700, lenders find it safe enough to lend you a loan. 

2. You can conveniently secure the capital required for your business expansion

As a company expands, it may require the purchase of additional equipment or capital to cater to the growing expenses. While applying for a loan, one of the factors considered by the lender would be the business credit score and credit history. Of course, there are other factors that as well such as business revenue, assets & liabilities, profits, the collateral value of the equipment that the company seeks to purchase with the loan proceeds, and so on. With a good business score, you will be able to secure a hassle-free loan for your business.

3. Protects your personal credit score

Banks do not stop at merely a business credit score check. They also insist on checking the lendee’s personal credit score. By checking personal credit report, the lender gets to know how diligent the key decision-maker of the business is in managing his or her personal finances and how much loan outstanding the decision-maker holds in personal capacity. If you have a good business credit score, your personal credit score won’t hold much weight, thereby, relieving the burden off your shoulders.

How to check your business credit score?

CRIF High Mark is a business credit bureau providing a credit score for your business. You can get your CRIF business credit report and Score in just 3 simple steps:

1. Fill in your Business Details such as name of the business, PAN, address, name of authorized signatory, PAN of authorized signatory
2. Secure pay for your report
3. Upload your documents such as a scanned copy of PAN, Address proof, etc.

Your report will be sent to you within 7 working days upon successful verification of the shared documents.

8 Steps to Getting Out of Debt

Can debt accumulation hurt mycredit score and financial planning? How do I ensure to stay on top of my credit report? How do I get out of this vicious cycle of debt? If you have ever pondered over these questions, now is the time to act upon it.

‘Debt’ is a word many dread having as a part of their lives, but it may inevitably crop up at some point in your life. Although it may seem difficult, it isn’t an impossible task to get rid of debt altogether. The benefits of clearing debts are multifold!

• You restore your control over your finances
• Getting out of debt helps your credit health
• Building wealth becomes easier & faster

Related Read: 7 Quick Tips to Increase Your Credit Score

As much as one works towards clearing them as soon as possible, the day-to-day expenses don’t help in getting rid of the weight of debt. However, there are a few strategies that you can implement to clear your debt sooner than later! Managing debt should be an integral part of making a financial plan. If you continue to go with the trend of increasing your debt year after year, you end up being in the negative of your net worth.

If you are looking to shed some ‘debt weight’ from your finances, here are 8 steps you can follow!

Step #1: Ensure that you pay your loan EMIs on time

To maintain a credit score needed for personal loan, paying your loan EMIs on time honestly does half the job. If you devise a plan and stick to it, paying off all your debt will be a cakewalk. If time permits, focus on clearing one debt at a time. Clear the debts that have the highest chances of penalization & interest rates; move in a descending order thereafter.

Step #2: Align your expenses properly

The aim is to plan in such a way that there is enough left to fend for yourself through the month and pay your debts & dues on time. Your expenses should not cross over to your share of the money set aside to pay loan EMIs. So, make a budget as per your income and expenses laid out clearly. Once you know the percentage of your income you must dedicate to debt clearance, it will be easy to align your other expenses.

Step #3: Clear your credit card dues first

To maintain a good creditscore, you must pay your credit card dues on time. So, if you have accumulating dues on your credit card, focus on clearing them first. This will play a role in maintaining your credit score. Ensure that you keep your credit utilization ratio to 30% to 40% of your credit limit.

Step #4: Prioritize your debts as per due dates & amount

You can choose to clear debts in 2 ways. You can clear debts with a high interest rate first and then move in a descending order. The other way is to clear debts as per amount. If there is a loan amount that you can clear in one or two payments, then clear those first and then move to the bigger loans.

Step #5: Prioritize loan EMI payments as per penalties

Focus on those debts which have high penalties. The last thing you want amidst stringent expenses is an added expense of a fine or probation. So, make sure you also consider clearing debts based on the penalties. Pay the ones with high chances of penalties first and then move on to the remaining loans.

Step #6: Set up Auto-debit wherever possible

Netbanking platforms for most banks offer the handy feature of auto-debit, which you can use to pay your credit card dues. You can also use this feature to take care of your other monthly expenses. So, a good move will be to make use of this feature on a date soon after your salary debit.

Step #7: Create a plan for debt clearance & follow it

Once you take care of clearing the accumulated debt, move towards putting a plan in place. This plan should focus on your income, debts, expenses & be date specific in every section. To avoid debt accumulation, you need to be disciplined and pay your loan EMIs & other dues on time. So make a plan & stick to it!

Step #8: Never let your debt accumulate beyond your control

Now that you have successfully paved your way out of debt, don’t sit back & relax! Make sure that a situation of multiple debts doesn’t repeat itself. Stick to paying no more than one or two EMIs at a time.

If you clear your debt on time, not only will your life be easy to manage, it will better your credit score too! If you are currently going through the phase of clearing multiple debts, checkpersonal credit score from CRIF, one of the leading credit information companies in India first & plan with these steps accordingly!