The Keys to Good Credit
When seeking a loan for a commercial equipment purchase, it’s important to know what role your credit – good or not so good – plays in determining whether you’ll qualify.
What Does Good Credit Look Like?
If you’re applying for a commercial equipment loan, your credit score is going to be a factor; there’s no getting around it. Credit scoring ranges from 200 on the low end to 850 on the high end. Your credit score is determined by your history of handling and carrying debt and if your bills are paid on time.
As a lender reviews your credit score – along with other factors – they’ll determine whether you’re “risky” or not. If a lender does approve you for a loan, a higher credit score typically equates to a lower monthly interest rate. In contrast, a lower credit score usually means a higher monthly interest rate. If your credit score is 620 or lower, it may prohibit you from borrowing money with some lenders.
What if you have a low credit score? It doesn’t necessarily mean you’re stuck. There are plenty of beneficial ways to boost your credit score or build it if you’re just starting out (or starting over).
Get a Credit Card (As Early as Possible)
Applying for a credit card can help you build credit if used properly. The key to developing “good” credit via a credit card is to make sure you always pay your bill on time and don’t carry a balance.
If your credit card is swiped too frequently, it can send you spiraling in the wrong direction. Ensure that your credit card is only being using on items that you would purchase already and stay away from impulse buys and larger purchases that can’t be paid off on time. In other words, don’t spend money you don’t already have on hand.
There’s also the alternative of a secured credit card if you don’t have a long history of credit or you’re facing debt. Secured credit cards require a security deposit to open and aren’t typically active for the long-term; this option can be a beneficial way to boost your credit over time.
Become Authorized On Someone Else’s Card
Another option for building credit is to become an authorized user on a credit card. A family member, loved one, or colleague could “authorize” you on their existing card. This allows their credit history to be connected to yours, which can help you build credit. One caution is to ensure the credit card owner consistently makes payments on time.
Interestingly, if you become an authorized user on someone else’s card, your credit score won’t be linked to theirs. Meaning, if you have a poor credit history, it will not affect the card holder’s credit history.
Paying Loans (On Time!)
If you’ve taken out loans in the past, whether it’s an equipment loan, student loan, a mortgage, or a car loan, paying them on time each month can help you build “good” credit. Setting up automatic payments on loans is a great way to ensure that you’ll never miss a payment.
However, taking out loans to build credit isn’t always ideal, especially if you’re already in debt. A secured loan, much like a secured credit card, can be a quick and often painless method of building credit without putting yourself in financial turmoil.
Having a low credit score can seem like a tough challenge to overcome, but there are many ways to boost your credit score in a short amount of time. The higher your credit score, the more likely you’ll qualify for a lower-interest loan when the time comes.
Have questions regarding your credit score or taking out a commercial loan? Contact an Oakmont Capital Services’ finance professional at email@example.com today. We make it possible!
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