By: First Union
18 Business Loan Requirements - Personal Credit Score
When applying for a business loan product, your credit score will come into play. Lenders want to see evidence that you are trustworthy and can thus pay back the money loaned to you. Without knowing a great deal about you or your history, a personal credit score is one of the most reliable guides that lending institutions have to evaluate loan qualification. That said, your credit score will also most likely factor into the interest rate that you do receive.
Because you are the owner of the company, the buck stops with you, and this applies to loan repayment. Do you have a history of missed or defaulted payments? Are there numerous red flags when it comes to your credit report? Lenders want to know this information—they will scrutinize it. Essentially, they want to see how you manage your finances and if you are responsible.
At first, the lender will do a "soft credit pull," which does not affect your credit score. If they are good with the results, the lender will then pre-approve you for the loan. During the underwriting phase, they will proceed with a "hard credit pull." This request to check your credit could ding your personal credit score a couple of points—so be aware of that.
Basically, the higher your score, the better your options—it is as simple as that. Anything above 700 and your approval odds, along with interest rate options, will be looking good. Above 600, and it may be a bit tougher, but you should still be in the running. Remember, you can always improve your score and, therefore, your odds of qualifying for a business loan.
At First Union, we do look at your credit score, but we also evaluate accompanying information about your business. We want to find ways to help you get the money you need to grow and thrive. Call us today!
You’re reading Part 10 in our 18-part series – 18 Business Loan Requirements.