Getting finance with bad credit is doable

Getting finance with bad credit is doable but there could be a better option.

Due to the additional risk you bring to the table with a low credit score, you won’t have as many lenders competing for your business, and the rates you’re offered will reflect this.

But you don’t need to settle—use these seven tips to work towards a stellar credit score, in order that you can secure the rate you deserve.

Alternatively, speaking with a lending expert at Instant Business Funder can help you identify your finance options through a soft check, without impacting your credit score whatsoever.

What affects your credit score?

Making a late payment, having incorrect details on file and applying for credit too many times can lead to a decrease in your credit score. If you’ve been bankrupt or defaulted on a loan, this is often likely to have an even bigger impact.

Essentially, lenders want to ascertain a good debt on file, and only good debt. Good debt includes business loans and mortgages. These are signs that you’re making positive life choices.

However Bad Credit looks like multiple loans and credit cards, especially if they’re taken out around the same time.

Applying online for finance repeatedly during a short space of time can signal financial trouble, and lenders could assume you’re struggling to make ends meet.

Tips for improving your credit score

It won’t happen immediately, but you can definitely turn things around and achieve a healthy credit score. Once you’ve improved your credit score, you can then look into your refinancing an existing debt or take out a new loan when the timing makes more sense.

1. Pay on time

Paying off existing debt on time is the best thing you can do for your credit score. Missing even a single payment can have an bad impact, and will be recorded on file. If you continue down this road, repeatedly missing payments, you will run the risk of default.

Making regular and on-time repayments, on the other hand, shows that you’re financially responsible. Consider setting up a direct debit so that you have one less thing to worry about.

With the introduction of positive credit reporting (also known as comprehensive credit reporting), lenders and financial institutions get a much more accurate picture of your creditworthiness. It’s not just the negatives that are recorded on file. Good credit behaviour, like paying existing debts and bills on time, will help to lift your score as well.

This gives you the opportunity to make a good impression rather than being judged only when things go horribly wrong.

2. Diversify your credit

Getting the balance right between having enough credit and not too much is important not only for your business, but for your credit score as well.

Paying off and old debt, a mortgage and a credit card shows you can handle credit reliability (assuming you’re paying your debt off without trouble) and manage different types of payment systems.

A wider range of loan products makes it easier for lenders to understand where money is going as well. But you don’t want to overdo it—only take out what you need and can handle.

3. Think before you apply

Too many loans or credit enquiries can be a red flag for lenders, especially if they're done in a short space of time. Lenders might question your creditworthiness and quickly come to the conclusion that you’re struggling to manage existing debt.

Keep credit use under 30% (10% is even better) of your credit limit, as you don’t want lenders to feel that you’re dependent on credit.

4. Check for mistakes on your statement and credit file

Your credit file houses information like your name and address, current debt, credit enquiries, employment information and previous court appearances. If something seems off, even if it’s as simple as an incorrect address or misspelling of your name, it’s important to fix it.

If left unresolved, a simple error could impact your credit score over time, so it’s important to check your details regularly and make sure they’re correct.

If you do notice some incorrect details on file, contact the credit reporting agency ASAP, as well as the information provider (that is, the company giving incorrect information to your credit reporting agency). Alert them as soon as possible, preferably in writing.

5. Don’t Move

Lenders are more inclined to offer funding to business owners who can prove stability.

Moving from property to property or having irregular income isn’t desirable. If you’ve been at your property for a number of years, this is a good thing as it says that you’re comfortable making commitments, and more importantly, keeping them.

6. No credit history yet? Stick it out

If your credit file is fairly new or you’ve never applied for finance, you might be surprised to find your credit score isn’t considered ‘excellent’. Don’t worry, this is completely normal.

The longer your credit history, the better your score tends to be. This is because having some debt (and successfully paying it off on time) builds trust, which can boost your score.

A little bit of healthy debt is considered better than none.

7. Apply with Instant Business Funder

That’s because Instant Business Funder gives you the freedom to explore your options free of consequences before making a decision, and find out where you stand with lenders.

We hope you found our top tips for improving your credit score helpful, and if you have any questions about your finance, feel free to get in touch with an expert.