{"id":6691,"date":"2020-11-27T05:54:23","date_gmt":"2020-11-27T05:54:23","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=6691"},"modified":"2023-10-26T05:52:07","modified_gmt":"2023-10-26T05:52:07","slug":"why-is-a-good-credit-score-important","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/why-is-a-good-credit-score-important\/","title":{"rendered":"Why Is A Good Credit Score Important?"},"content":{"rendered":"<p><iframe src=\"https:\/\/w.soundcloud.com\/player\/?url=https%3A\/\/api.soundcloud.com\/tracks\/936921052%3Fsecret_token%3Ds-YqSXGgEaR9R&amp;color=%23ff5500&amp;inverse=false&amp;auto_play=true&amp;show_user=true\" width=\"100%\" height=\"20\" frameborder=\"no\" scrolling=\"no\"><\/iframe><b>Credit score<\/b><span style=\"font-weight: 400;\"> represents an individual\u2019s or business\u2019s creditworthiness. It is a measure of how efficient a borrower is, when it comes to handling debt. If your business tends to fall behind on loan repayments frequently, the company\u2019s credit ratings are bound to suffer.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Credit information companies or CICs, such as TransUnion CIBIL, keep track of this score for each credit active individual or company. Thus, every time your organisation fails to meet service EMIs for a <\/span><a href=\"https:\/\/www.kredx.com\/business-loan\/\"><span style=\"font-weight: 400;\"><b>business Loan<\/b><\/span><\/a><span style=\"font-weight: 400;\">, this credit score drops.\u00a0<\/span><\/p>\n<h2><b>Importance Of Maintaining A Good Credit Score<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">A business can benefit significantly by maintaining an impressive rating. Listed below are some of the advantages that your business can experience by ensuring an exemplary credit record \u2013\u00a0<\/span><\/p>\n<ul>\n<li>\n<h3><b>Ensures A Quick Borrowing Process<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Lenders are always more open to extending lines of credit to companies having a reliable repayment history. If you are seeking funds, make sure that your company\u2019s credit score score is 750 or above. Banks and other NBFCs determine the risk profile presented by a particular business, using this <\/span><a href=\"https:\/\/www.kredx.com\/cibil-score\/\"><b>credit score<\/b><\/a><span style=\"font-weight: 400;\">. Thus, maintaining a high rating generally results in hassle-free loan approvals.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To ensure credibility with lenders, it is essential to always repay the company\u2019s outstanding debt on time. If you use a business credit card, remember to service its bills in full, on or before the due date.<\/span><\/p>\n<ul>\n<li>\n<h3><b>Boost Eligibility For Substantial Loan Amounts<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Lenders severely restrict a business\u2019s <\/span><b>loan<\/b><span style=\"font-weight: 400;\"> amount eligibility, if the company in question has poor credit scores. You may not be able to avail the desired amount due to imperfect repayment history and track record.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Contrarily, corporations with impressive credit ratings, enjoy the benefit of acquiring considerable sums as business finance from banks and other financial institutions. In general, lenders are more likely to offer big-ticket <\/span><b>loans<\/b><span style=\"font-weight: 400;\"> to your brand, if your business is deemed creditworthy.<\/span><\/p>\n<ul>\n<li>\n<h3><b>Avail Finance At Lower Rates And For Considerable Tenure<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Apart from determining the value of a business loan, your company\u2019s creditworthiness also decides the interest charged on a particular advance. Entities deemed riskier, often need to service the considerable interest on their <\/span><b>loans<\/b><span style=\"font-weight: 400;\"> and vice versa. If your business\u2019s credit scores exceed the minimum requirements, you stand a much better chance to acquire business finance at the most competitive terms.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another major benefit of maintaining a dignified credit rating for your business is that lenders may allow you more time to repay the borrowed sum. Increasing the repayment tenure can reduce your company\u2019s immediate financial liabilities, thereby freeing a portion of your capital for other purposes.<\/span><\/p>\n<h2><b>How To Improve Credit Rating?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">If your company\u2019s current credit score insufficient to avail financing, following the tips mentioned below can help you build a better credit history.<\/span><\/p>\n<ul>\n<li>\n<h3><b>Repay All Dues On Time<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">As a business owner, you may be tempted to let some dues remain unpaid until the company\u2019s finances improve. Nevertheless, doing so will hamper your creditworthiness, limiting your chances of availing loans or advances in the future.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To avoid such complications, always service your business\u2019s existing debt on time and without fail. Use company credit cards sparingly if paying their monthly bills seems too troublesome.<\/span><\/p>\n<ul>\n<li>\n<h3><b>Lower Credit Utilisation Ratio<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Another sure way to improve <\/span><b>credit score<\/b><span style=\"font-weight: 400;\"> is to limit your credit utilisation to just around 30%. The credit utilisation ratio is the comparison of the amount of credit your company uses, against the total amount available.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A method of limiting credit utilisation would be to avail <a href=\"https:\/\/www.kredx.com\/working-capital\/invoice-discounting\">invoice discounting<\/a> instead of a typical business <\/span><b>loan<\/b><span style=\"font-weight: 400;\">. Since this financing is available against your company\u2019s unpaid invoices, you limit the risks of defaulting on their repayment and also eliminate the chances of lowering the credit score.<\/span><\/p>\n<h3><b>Bottom Line<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Credit rating is of utmost importance for individuals and businesses alike. Company owners need to ensure its maintenance at all times, failing which they may find a dwindling number of creditors ready to extend funding to them.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Credit score represents an individual\u2019s or business\u2019s creditworthiness. It is a measure of how efficient a borrower is, when it comes to handling debt. If your business tends to fall behind on loan repayments frequently, the company\u2019s credit ratings are bound to suffer. Credit information companies or CICs, such as TransUnion CIBIL, keep track of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":6692,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[36,1130,561,37,58],"class_list":["post-6691","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-business-loan","tag-cibil","tag-credit-score","tag-invoice-discounting","tag-loans"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6691","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=6691"}],"version-history":[{"count":1,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6691\/revisions"}],"predecessor-version":[{"id":13696,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6691\/revisions\/13696"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/6692"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=6691"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=6691"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=6691"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}