Commercial loans are tricky business so you must be careful with them. On one hand there are certain things that you must accomplish and there are some things that you must never do. Let’s know more.
Care (The Do’s)
Basic knowledge about the terms such as capital, credit history, financial standing, collateral and so on is a must for you as you surely do not want your debt agents to take you for a ride. Also you must know even the minutest details of your business and its prospects in the competitive market. The loan company may not be well versed with your field of work and you may have to educate them.
You also need to keep all your papers intact. Your financial statements, balance sheets, tax return records, proof of business, residential address, etc., must be ready at hand. Sometimes even a single missing paper can delay the loan sanction.
Creditors give a lot of importance to the financial history of the borrower. This includes their standing in their credit reports. To seem a good investment option, take care to repay all your previous loans. Or at least make sure your credit history for the past six months is good. In case you still have some mortgages to clear, make sure that the payments are regular and on time. Delayed payments or non payments put off lenders.
The scoring system in the credit records gets affected even if you make changes in your credit pattern. To avoid raising red flags, continue using your credit as normal.
Credit reports go a long way so always try to be in the good books. This also means that if you ever chance upon any negative remarks about your credit position then contact your lender immediately. Sometimes when they are convinced about your reliability and integrity then they tend to ignore even payment delays.
The three credit bureaus issue complimentary copies of credit reports every 12 months. Make sure you get yours.
Caution (The Don’ts)
First and foremost, don’t fall for unnecessary loan approval schemes. Unless you are in dire need of money it is best to ignore proposals that seem to throw money your way. Apart from needless economic burden it also affects your credit score. Depending on the way your credit position is shaping up, even one hard enquiry may pull you back by 2-50 points.
Clearing off old debts immediately decreases your credit score as the date of last activity becomes recent. If you still want to pay off then don’t forget to get a letter of deletion from your creditor.
Try not to close old credit card accounts because it would seem to FICO that your debt ratio has gone up. Such action will also affect the length of your credit history. Do so only if the account is a more recent one or if the closing date has passed.
Over charging on credit card also adversely affects credit score. Try to keep your balance below 30% of the available credit limit. And don’t squeeze one card for all your financial needs because then it would seem that you are maxed out on that card and your credit score may fall by 50-100 points.
Lastly, it is not advisable to change your address or name during the loan process. The lesser the activity, the better it is.
Just follow these important dos and don’ts and you can be assured of a smooth loan process.