When a small business requests a loan, one of the first things a lender looks
at is personal and business credit history. So before you even start the process
of preparing a loan request, you want to make sure you have good credit.
Get your personal credit report from one of the credit bureaus, such as TransUnion, Equifax or Experian. You should
initiate this step well in advance of seeking a loan. Personal credit reports
may contain errors or be out of date, and it can take three to four weeks for
errors to be corrected. It is up to you to see that corrections are made, so
make sure you check regularly on progress. You want to make sure that when a
lender pulls your credit report, all the errors have been corrected and your
history is up to date.
Once you obtain your credit report, check to make sure that all personal
information, including your name, Social Security number and address is correct.
Then carefully examine the rest of the report, which contains a list of all the
credit you obtained in the past such as credit cards, mortgages, student loans
and information on how you paid that credit. Any item indicating that you have
had a problem in paying will be toward the top of the list. These are the
credits that may affect your ability to obtain a loan.
If you have been late by a month on an occasional payment, this probably will
not adversely affect your credit. But it is likely that you will have difficulty
in obtaining a loan if you are continuously late in paying your credit, have a
credit that was never paid, have a judgment against you, or have declared
bankruptcy in the last seven years.
A person may have a period of bad credit as a result of divorce, medical
crisis, or some other significant event. If you can show that your credit was
good before and after this event and that you have tried to pay back those
debts, you should be able to obtain a loan. It is best if you write an
explanation of your credit problems and how you have rectified them, and attach
this to your credit report in your loan package.
Each credit bureau has a slightly different way of presenting your credit
information. Contact the bureau you used for more specific information how to
read your credit report. If you need additional help in interpreting or
evaluating your credit report, ask your accountant or a local banker.
Source: sba.gov
Sunday, November 4, 2012
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