More than 30 million people in the United States have bad credit scores (less than 620). And now, thanks to the economic situation in the country, it is even more difficult to get a credit card or a loan on fair terms.
For those smaller business entrepreneurs, to help fix the problem, you must first face your actual credit score. Despite offers of free credit reports, you still have to pay to find out your score, which is a three-digit number ranging from 300 to 850.
Here’s how: Go to MyFico.com, or you can get Experian’s “consumer education” credit report. Here are some tips for credit repair:
1) Try to use your credit cards less often, if not sparingly. Carrying up large balances can hurt your score, regardless of whether you pay your bill in full each month and on time.
2) Don’t hire a service to “fix” your credit. “Don’t believe these claims,” says the Federal Trade Commission (FTC): they are most likely signs of a scam. In fact, attorneys for the nation’s consumer protection agency say they’ve never seen a legitimate credit repair operation make those claims.”
3) The fact is that there is no quick fix for creditworthiness. You can legitimately improve your credit report, but it takes time, effort, and sticking to a personal debt repayment plan.
4) The credit bureaus calculate what you report to them in your score, which is the balance reported on your last statement.
5) Try to pay off or pay off credit cards. The credit scoring system is based on a preference for a gap between the amount of credit you are using and your available credit limits.
6) It’s a good idea to rotate your credit cards. The older your credit history per card, the better it is, so if you stop using a card, issuers may stop updating the account with the credit bureaus and it won’t carry as much weight in the credit score formula as active accounts.
7) Be sure to check your credit limits. Charging the same amount each month, say $500 to $800, makes the credit score formula think you’re regularly maxing out the card. Simply pay off your balance before the end of your statement period.
8) Accounts receivable factoring is an old tactic that could help you pay off your credit card debt. You can use single invoice factoring for immediate cash.
Factoring is regaining popularity as a secure financing method to improve a company’s cash flow. And in case you don’t already understand, factoring is when a business decides to discount its accounts receivable, at which point the factor assumes the credit risk of the accounts and becomes the recipient of the customer’s payment. Factoring is one of the most effective and efficient forms of financing, or financing a small business with cash flow today.