If you ever have a credit card, a loan or a bill, then you may have heard about credit reports.
What is a credit report? How does it affect your business? In the midst of increasingly advanced financial environment, everyone must understand the definition of a credit report because this is one of the most important documents in your financial life.
What is a Credit Report?
A credit report is a collection of information about how you handle your credit and debt accounts. This report includes information about how much debt you have, how you pay your bills, where you live, where you work, whether you ever filed for bankruptcy or a court ruling, and whether you ever had a house or vehicle taken over.
One credit report may contain a lot of financial information. That is why annual credit report can have more than 100 pages.
How to Get Your Credit Report Information
Credit reports are managed by businesses known as credit bureaus or credit reporting agencies.
Companies that you have any dealings with send your debt information to the credit bureau which then updates that information in the credit report. Most credit cards and debt accounts will be updated on credit reports every month.
Some businesses do not renew credit reports that match your monthly payments, but they will immediately notify the credit bureau when you are in arrears of payments.
For example, a purchase bill is not automatically included in your credit report but if you are late in paying more than six months, the bill may be listed on your credit report as a debt collection.
What are the Components of a Credit Report?
Credit reports include basic identity information such as your name, address, and place of work. You should make sure that all the spellings are correct. Sometimes, writing error on a credit report can cause problems, like allegation of identity theft.
Your credit report contains detailed information about your credit cards and loans. In a credit card report, balance amount, credit limit, account type, account status and overall payment history will be listed.
Loan balance, initial loan amount, and payment history will also appear on a credit report. Public records such as bankruptcy, confiscation, repossession, and tax rights are recorded in a separate section of your credit report.
Why Should You Check Your Credit Report?
You must check your credit report at least once a year to make sure the information in it is correct. If you suspect you have been a victim of identity theft, you must monitor credit reports more often.
Checking credit report can be done in several ways. Among other things, you should be able to check through a website set by the government, through promotional offers, or by buying from a credit bureau.
Why is a Credit Report Important?
Some companies or even your colleagues will likely check your credit report before deciding to work together with you. The bank will check your credit report before approving credit card and loan application, including a mortgage or a car loan.
Some employers check credit reports as part of their application process. Your credit report affects many parts of your life so it is important for the information inside it to be accurate and positive.
Your credit report is the only source of information for your credit score, a number that lenders sometimes use to approve your loan application. A credit score is a three-digit number that helps assess credit reports. A high credit score indicates that you have positive information on your credit report while a low credit score indicates negative information.
If you ever dream of having a profitable and growing business company, one of the main things to do is to make sure you have a proper credit report.
Benefits of Having a Credit Report for Your Business
1. Quick Loan Approvals
One of the easiest options to get out of a financial crisis is to apply for a loan from a bank or looking for alternative funding options. Unfortunately, not every businesses that applies for loans is approved. Why? One of the many factors that influence credit approval is the lack of information in the company’s credit report.
Thus, to get a fast loan approvals for your business, you must try and ensure that your business credit report is well established and positive. The stronger the report, the faster the loan approval!
2. Leasing of Office Space
As someone who runs a business, you may need extra space for expansion. In addition, you may want to completely move your business to a new location. You will obviously rent office space in such situations. However, a bad credit score may run your chances.
This is because many landlords have used business credit reports as a consideration. First of all, they will check your business credit score before allowing you in. If you have a solid credit rating for your business, then you will have no trouble leasing the office space.
3. Attract Other Business Investors
When an entrepreneur starts a business, the future of the business is never known. If by good luck, the business is successful, there is a higher chance for other entrepreneurs to come in and form partnerships with you. This may not not happen if your business has a low credit score.
On the other hand, due to financial struggles in the business, an entrepreneur may want to sell it off to other investors. A business with a good credit report will be a positive factor that prospective buyers take into consideration. Another scenario is when you want to grow your business. An investor will come to improve your business only after verifying and ensuring that your business has a good credit report.
4. Low Interest Rates on Loans
Interest rates are one of the fees you pay back for taking loans from financial institutions. Nowadays, the interest rates paid by business owners depend on the business credit score. If you have a good credit score, you will be eligible to get the lowest interest rate from a bank. This is because a good credit report is a sign that you repay all your debts on time.
Therefore, it is very important for business owners to work hard to improve their business business credit score.
Make sure that you pay all bills on time, repay your loans, and monitor your business credit reports regularly to correct any errors that you may find.
5. Higher Loan Limits
The bank credit department provides loans to businesses that have strong credit scores and profiles. A good business credit report clearly shows that a business can fulfill its financial obligations.
The better the business credit report, the higher the loan limits that your business can qualify for. This means that you can apply for financing to get access to fresh funds from banks or other financial institutions. Work on your business credit report now and enjoy all these benefits to grow your business to the next level.