One of the biggest obstacles some entrepreneurs must overcome when it comes to starting a business is their credit history.

Being “bankable” to get that business loan and launch that business idea depends on these parts of your credit report: payment history, amount of debt, mix of accounts, and number of accounts. Let’s start with payment history.

Consistent late payments make you a bigger risk to creditors and has one of the greatest impacts on your credit score. Payment history is a part of your credit that is harder to fix, but making sure you don’t take on more debt also means less risk to creditors. So if you’re new to the borrowing game patience, consistent payments, and time are key to increasing your credit score.

Another bankability issue entrepreneurs face is the amount of debt they carry. A client with too much debt is a risk for creditors as they will face troubles paying it all back. If you find that constant late payments have been the Achilles’ heel as of late, make a plan to fix them.  Start setting aside money to pay that debt off and be rid of it. Sometimes the simple act of contacting the creditor and asking for a payment plan or a way to get ahead of the account is a great way to start. If you find that you have a collection out on you, clear it up as soon as possible. Don’t transfer it to a new account and just move around the debt, pay it off either in a lump sum or as funds permit.

Before applying for loans, make sure you have a good mix of account types. Creditors like to see your ability to handle different kinds of debt from credit cards to auto loans. If you only have one type of credit, your score might remain stagnant.

The number of open credit accounts you have also impacts your credit score. if you have applied for 12 different credit cards in the past month, creditors will begin to wonder why.  Don’t give the illusion of overextension, keep a manageable amount of accounts and you’ll see your credit improve.

Bankruptcies are another issue that affects bankability, but they don’t last forever. If you have filed for bankruptcy, make sure that those are correctly disappearing from your credit after the allotted time that it can stay on your report. Check federal laws to see exactly what those limits are. The key to climbing out of bankruptcy is not only patience but vigilance, so keeping on top of your credit report will be key.

There are many factors even beyond your credit score that determine how bankable your business is.  Your local Wyoming Small Business Development Center (SBDC) Network advisor can help you come up with a strategy to get your credit score back where you want it to be so banks will look favorably on your request for a business loan. All the information you share with us is confidential, so your advisor will be able to take a look at the report and help you move through it.

Fixing your credit is a marathon, not a sprint. All it takes is getting your credit report, knowing what to look for, and creating a plan to get out of debt, become bankable to get that loan, and launch your business.

Robert Condie is the Southwest Regional Director for the Wyoming Small Business Development Center Network. Rob is a QuickBooks certified Pro Advisor and can help in most all of the other well-known systems available. He received his Bachelor’s Degree in Accounting from Dixie State University and has two years of commercial lending experience as well as three years as a retail manager. In addition to his professional pursuits, Rob is an avid outdoorsman and loves spending time in the mountains or on the water. He also enjoys time spent with his four kids and wife doing just about anything.

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