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Fico Score - What is it and How Does it Affect Me?

Guest post by: Kristin Thayer

Article Overview: Your Fico Score, a.k.a. Credit Score, is important and there are many simple ways to improve it. We'll cover those in a minute but first, what is a good credit score? Do you know what your credit score is? Why does the finance company look at your personal credit but they tell you the financing will be in the business name? These are some common questions that business owners ask when it comes to understanding their Fico Scores.

Fico Score - What is it and How Does it Affect Me?

There really is no magical number that determines if you have a good credit score or not. Obviously, the higher your credit score is, the easier it will be for you to be approved for Small Business Financing.

Do you know if your credit is healthy? If you do not know what your credit score is or do not know where to go to view your credit, we recommend AnnualCreditReport.com. The site is easy to navigate and the reports are quite easy to read.

"I rarely ever use credit because I don't like borrowing money and paying interest. I have a couple of open tradelines and a high Fico Score so I should be all set, right?" Wrong! It is possible for a person to have a 720 credit score with only 2 tradelines (accounts) listed on his entire credit history, while another person has a 650 credit score but he has 25 total tradelines on his credit report. 10 of those are currently open and only 1 account has ever been 30 days late.

The second person in this scenario gives a better idea of how he will pay back a loan because he has a much larger credit history. The first guy may have a 720 credit score but he only has 2 accounts so he hasn't really had to manage much debt before. So don't be overly concerned with what your actual Fico Score is.

What you should be concerned with is how many tradelines you have, how old your oldest tradeline is, how much revolving credit you have available to you and how much you have remaining that you haven't used. These are the key items that Small Business Financing companies are going to look at. Oh and of course, they also look to see if you pay these tradelines on time.

The number of tradelines is important because as we mentioned above, the more history you have, the bigger the picture of how you handle and manage your debt. If you are just beginning to build credit, you will have a hard time getting approved for Small Business Financing but don't be discouraged. Everyone had to start somewhere.

It is a good idea to always have anywhere from 5 to 7 tradelines constantly working your credit report.

Less than 5 is too little to judge you on and more than 7 open tradelines can be difficult to manage.

This doesn't mean if you have more than 7 right now you should go and close them out. We're just trying to give you a general guideline. Although, if you have more than 7 tradelines and you are maxed out on every bit of credit that is available to you, put the brakes on and pay down your debt. You are a very high risk when you are maxed out. You may also want to learn ways of Improving Your Credit Score.

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Article Tags: business name, business owners, fico score, fico scores, finance company, personal credit, what is a good credit score



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