How to Navigate Personal Credit
It can be frustrating to be turned down for a loan due to poor personal credit. How does the system work and what can you do about it?
There are three major credit bureaus that report and update a person’s credit history: Experian, Equifax and Transunion. While each agency does this differently, according to Experian, the main components include: payment history, total amount owed, credit history length, credit mix, and new credit.
Generally any lender that you borrow money from will need the reassurance that you will pay them back. While the system isn't perfect, your credit score and credit history are one of the main ways that lenders quantify this risk. This means the better your credit score, the more likely you are to be approved for funding and potentially at a better interest rate.
Non-bank alternative non-profit lenders, such as B:Side Fund, can be more flexible with personal credit histories. However, at minimum, lenders will still want to see that the business and its owners are making changes such as paying down debt or making on-time payments. For example, B:Side Fund wants to see on-time payments, any previous past due or delinquent accounts are resolved and a minimum of a 630 personal credit score for any owners of 20%+.
Anytime a lender requests a personal credit report, the “hard” inquiry will be recorded on your credit file. When there are multiple “hard” pulls in a short period of time, it can lower a person’s score. In addition to seeking permission to pull personal credit, we also ask the applicant(s) if there are any personal credit issues we need to be aware of. We do not want to pull a report, which would potentially be harmful to the applicant, if they are already aware of personal credit issues.
Our intent is to assist small businesses that are considered “pre-bankable”; or more simply put, businesses that don’t yet meet the general criteria required by traditional banks. Our long-term vision is for these same business borrowers to be able to graduate into the banking system by providing an opportunity to demonstrate repayment ability. They can then refinance their loan with us for a more favorable interest rate with a bank.
If you need assistance to improve your credit score, check out some of these resources:
If you don’t meet our credit score criteria and are in need of financing, here are some other lenders that may be able accommodate lower credit scores:
To learn more about the credit scores, visit the Federal Trade Commission here.