Stay nimble by managing your credit

Written by Briana Cavanaugh

October 4, 2021

Many business owners ask me what to do to ensure their business can have more cash on hand. Extra liquidity helps with unpredictable (sometimes very expensive) events! Have you ever considered getting a loan to help your business grow? Do you know what to do with your credit to make sure you’re ready to apply for a loan?

Even if you don’t plan to seek a loan for your business any time soon, it’s still a good idea to keep an eye on your credit. This will protect you against identity theft and credit reporting errors — and you’ll be ready to borrow if circumstances change later.

Credit Scores

The first step is to use credit wisely so that you’ll have a high credit score.

Did you know that the credit bureaus can charge you to see your score? You might be able to get your scores from the three credit bureaus as a free service through your bank or credit union, or if you use a finance app/website they may provide you that information for free.

Checking Your Credit Reports

When you get your whole credit report, you can see the details affecting your score.

Normally, you’re entitled to one free credit report a year from each of the three major agencies — Equifax, Experian and TransUnion. The FTC Consumer Information website recommends that you get your annual free credit reports only from AnnualCreditReport.com.

You can get your reports more often than once a year for various reasons including within 60 days of having a credit application denied. You can even get free weekly reports during the pandemic!

It’s a good idea to look at all of your reports. For example, I found a mistake in one of mine that was not reflected on the other two. This kind of thing happens because different companies report to different credit bureaus but not necessarily to all of them, and each of the credit bureaus handles things a little bit differently.

If you want to learn more about your free credit reports, start here with the FTC site.

Additionally, I recommend the book “Dirty Little Secrets: What the Credit Bureaus Won’t Tell You” by Jason Rich. Borrow it or buy it here.

Overall I find that getting and checking my credit reports is a pleasant experience. The effort really pays off.

Credit Counseling & Coping with Debt

Here’s a resource I found that has been helpful to my clients: Choosing a Credit Counselor. It’s on the FTC’s website and includes information about the structure of various agencies, a bit about how to tell if a credit counselor is legitimate, and what questions to ask them before you give them money or sign any agreements.

Additionally, the FTC site has good resources on getting out of debt and coping with debt, including free methods such as negotiating with your creditors. These links are also good for learning about debt relief scams.

If you’re considering credit counseling, check it out.

Debt Consolidation

Debt consolidation might simplify your finances, help you get out of debt faster, and/or save you money in the long run, but first check to make sure it’s the right solution for you. The best way to use debt consolidation is to pay off your higher-interest debt with a lower-interest loan. Don’t forget to include the fees when you’re deciding whether it’s worth it!

Funding Business Resilience and Growth

If you’re looking for disaster relief for your business, the SBA usually has grants on their website. For example, see their COVID-19 relief page. The FEMA website can also help you find grants for disaster preparedness and relief.

When preparing to launch a business growth plan, remember to a) consider alternatives such as grants and crowdfunding, and b) write a business plan and budget so that you can figure out how much loan you need and can afford to pay back. Entrepreneurs often underestimate how much money their plans will cost and overestimate how much income they’ll generate, so try to make a plan that won’t break you even in case of cost overruns and under-earning.

These steps don’t have to go in a particular order, and you don’t have to decide ahead of time whether to do grants or loans. If you apply for a loan and a grant at the same time, you might end up using the grant to pay down the loan. But if the grant doesn’t come through, it’s great to have a good credit score so that you’ll get offered lower interest rates when you apply for credit. Neat!

Need help with your business plan or budget? We can do that — contact Bliss Your Money today!

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