7 Ways to Boost Your Credit Score Before Applying for Funding

How scores are built

Scoring models weigh payment history most, then amounts owed, length of history, new credit and mix of accounts. Exact formulas are proprietary.

FICO publishes the general categories but not the exact math. Payment history and amounts owed carry the most weight. That is why the first steps below focus on them.

Owners should remember that personal credit often matters for business funding, especially for newer companies. Read personal vs. business credit score to see the difference.

Way one: never miss a payment

A single payment that is 30 or more days late can hurt a score and stay on the report for years. Automation prevents most misses.

Set up automatic payments for at least the minimum on every account. Add calendar reminders for the due dates you pay manually. If you are already behind, bring the account current as soon as you can and ask the creditor about hardship options.

If a single late payment was a mistake, you can ask the creditor to review it. Success is not guaranteed.

Way two: lower your balances

Credit utilization, the share of your limit you are using, is a major factor. Lower balances generally help.

If you carry $4,000 on a $5,000 card, you are at 80%. Paying it down to $1,000 brings it to 20%. Many experts suggest keeping utilization well under a third, and lower is generally better.

• Pay down the highest-utilization card first.
• Make a mid-cycle payment so the statement balance is lower.
• Ask for a limit increase only if it will not tempt you to spend more.

Way three: check reports and dispute errors

Mistakes on credit reports are common enough to check yearly. Disputing a real error can raise your score.

You can get your reports from each bureau through the official free-report service at AnnualCreditReport.com. Look for accounts you do not recognize, wrong balances and payments marked late that were on time. File disputes in writing with each bureau and keep copies.

Way four: keep old accounts open

Length of credit history helps a score. Closing an old card with no annual fee can shorten your average account age and raise utilization.

Keep long-held accounts open and use them lightly, such as one small recurring charge paid in full. Close an account only when the fee outweighs the benefit.

Way five: limit new applications

Each hard inquiry can lower a score slightly. Space applications out and use soft-pull prequalification where possible.

Hard pulls come from full applications. Soft pulls, used for prequalification, do not affect your score. ROI Funder applies with a soft credit pull. Learn more in hard inquiries explained and business loan prequalification.

Ways six and seven: healthy mix and ongoing monitoring

A mix of credit types helps modestly, and regular monitoring catches problems early. Do not open accounts just to improve the mix.

Installment loans and revolving credit together show you can handle both. Do not borrow just for that. Instead, check your score monthly through your bank or card issuer, many of which offer it free. Watch for sudden drops.

For companies, also build a separate business profile. See how to build business credit and build credit with a line of credit.

What score you need to get funded

Requirements vary by product. ROI Funder considers owners with a 500+ FICO, so improving a score can lower your cost even if you already qualify.

Banks and SBA lenders generally want higher scores. Online funding is more flexible, but better scores usually earn better terms. Review credit requirements for a business loan and getting a loan with bad credit.

You do not have to wait for a perfect score. Applying with ROI Funder takes a few minutes and has no impact on your credit score. Start here.