Your Personal credit rating used to be talked about as something mysterious or the great unknown. Nowadays a personal credit rating is something easily accessible and open for you to view.
The challenge here is in understanding what the report is telling you and knowing how this will impact on your business’s ability to seek finance and associated business products. Some of these products can be crucial to your success, so let us try and shed a little light on things.
Personal Credit Rating
The first thing you will notice about any personal credit rating report is the multicoloured graph, it will look something like this (on the right).
However, the key facts are hidden deeper within the narrative of the report. The score is a good guide but it is not uncommon to see lenders prefer a lower score over a higher score.
Sound strange? Well have a think about why –
- A good score is driven by no current poor payment history and a generally well operated credit past
- It doesn’t always take account of level of personal debt or how much of your ‘credit limits’ are being used, i.e. do you have spare credit or are you using everything you have?
- A period of poor payment a few years ago will have less of an impact on your score, it will still frighten a lender though
- If you have been applying for credit constantly in recent times it puts a lender on guard, it will not however impact overly on your score
So, bearing in mind these things then understanding what your personal credit rating is telling you is more important than the actual score.
How Does This Impact On My Business?
We will cover this in more detail later (see this post) but if you think of it like this it makes it easier to understand – ‘If you cannot run your own finances, could you run your business finances?’
This line is a common theory applied by business lenders and to be fair, it does have grounds in common sense.
Our advice would be simple, get your personal credit score, then read it from as if you are going to lend this person money, ask yourself what it tells you, then if you still have queries pick up the phone to Lime Consultancy, or contact us via the website.
If you have any queries regarding this post please add them above, or contact us via the website.
By Dave Farmer