Whether you’re looking to apply for a store credit card to purchase some office furniture for your small business or looking for capital to make one of the biggest investment decisions of your career – your credit score will help determine the eligibility of you and your small or medium enterprise.
What is a Credit Score?
A credit score is a three-digit number that is derived from a mathematical formula that specifically indicates your loan and bill payment history. Two of Canada’s largest credit-porting agencies are Equifax and TransUnion who uses a scale rating from 300 to 900.
What Qualifies as a Good Credit Score?
The higher your credit score: The lower you are deemed a risk to lenders; the more likely you are to be approved for a small business loan; and the lower your interest rates will be. As a general guide:
- 300 to 559 – Poor Credit Score
- 560 to 659 – Fair Credit Score
- 660 to 724 – Good Credit Score
- 725 to 759 – Very Good Credit Score
- 760+ – Excellent Credit Score
How is Your Credit Score Determined?
- Credit card payment history: Payment history includes carrying a balance on your credit card or if you’ve missed payments. The golden rules are to make bill payments in full and not to max out your credit card.
- Any outstanding debts: Whether it’s a student loan, line of credit or credit card debt; any unpaid debt will affect your credit score.
- The number of times you’ve recently asked for your Credit score: Believe it not, your credit score is impacted each time you ask for it; be diligent in making sure that you are up to date with the details of your report, but only do so annually.
- Credit history: Your credit history starts when you first acquired credit, and spans how long you have been in debt.
- Any filings for bankruptcy: If there is bankruptcy on record, this will have a negative affect your credit score, as you will be deemed a higher risk to lenders.