6 tips to boost chances to get approved when applying for a credit
Everyone has experienced the anxiety that comes with submitting a loan application and not knowing if they’ll be approved or rejected.
Unfortunately, there isn’t a magic trick to get rid of that sensation. There’re, nevertheless, strategies to increase the likelihood of approval and decrease the anxiety associated with getting denied business credit.
Making it appear as though you don’t need a loan is the secret, as a rule of thumb. Here’re six suggestions you can use immediately to increase your chances of being accepted when you apply for a business credit loan or card.
6 smartest strategies to increase your chances of being approved for a business credit card
We’ve come up with a few shortlisted strategies to improve your chances of getting approved for a business credit card if you intend to apply for one, as well as some potential application requirements. While following these steps won’t ensure that you’ll be approved, they’ll definitely increase your chances.
1. Examine your credit history and score
If you want to increase your chances of obtaining business credit cards, check your credit record and scores if you haven’t already. Your credit scores are determined by looking at the data in your credit report. This contains information on payment history, account balances, credit inquiries, delinquencies, and public records, among other things.
You can obtain a free copy of your credit report from each of the three major credit agencies, Experian, Equifax, and TransUnion, once a year.
Obtaining all three reports at once can be useful if you’ve never looked at your credit report beforehand to compare your credit history. For instance, your credit score may be impacted if one of your creditors only reports to one bureau rather than all three.
Ensure all the data is correct when you go over your reports. You’ve got the option of disputing any errors or inaccuracies with the credit reporting agency that is publishing the details. It’s legally required for the bureau to remove or fix any errors that it discovers, which could result in a few points being deducted from your final score.
2. Develop good credit-scoring habits
Payment history plus credit use in particular are given the highest weight when calculating FICO (Fair Isaac Corporation) scores.
The chances of getting a line of credit will increase if you’ve got a strong credit score – since creditors want to know that you can handle a second credit line and pay the monthly installments timely.
The percentage of your line of credit that’s currently being used is known as credit usage. The secret to raising your credit score is understanding how to control these two criteria. The main factor used to determine your credit score is your payment history. Just one missed or late payment can knock more than 50 points off of your credit score.
According to FICO, an individual with a 793 credit score would see a 100-point decline in their current score if they miss a payment after 90 days. However, a credit rating of 607 only would be reduced by 27 to 47 units as a result of the equal missed payment after 90 days.
By completing your payments on schedule each month, you may stay away from that situation. Automating payments from your bank account might make the process of paying your bills easier if you’ve trouble keeping track of due dates. As an alternative, arrange for alerts to notify you when a due date is approaching through your bank or with your billers.
The same holds true for all of your other obligations. Your credit history is kept in check if you make your regular monthly payments on time for your phone, vehicle loan, mortgage deals, and lease.
Just be sure that the credit bureaus receive notification of these timely payments so that they may be seen on your credit record. Also, when you apply for credit, certain credit card companies could take these payment commitments into account.
Maintaining low balances on your credit cards, if you have any, will also improve your score. Most lenders prefer to see your credit utilization number at 30% or less.
Another choice is to ask your credit card companies to raise your credit limit. If you don’t charge any new purchases to a higher amount, boosting your credit limit will decrease your utilization ratio.
3. Demonstrate some source of cash flow
Lenders evaluate your income in addition to your credit history to see whether you qualify for new business loans, given the rising rates of failed startups.
Creditors are probably worried about future delinquencies and consumers’ general capacity to pay off the loans they borrow because there are more than 40 million unemployed Americans.
Hence, you may be required to present more documentation to substantiate your employment and earnings than you might have in the past years. Although paperwork needs aren’t standard for all lenders, you might be asked to send in further verification to validate your identification and show your revenues.
Certain lenders ask for copies of bills as confirmation of location and SSNs (social security numbers) as proof of identification. Credit ratings and creditworthiness don’t give creditors knowledge regarding a borrower’s income, thus evidence of revenue may be necessary to gain the authorization of business credit.
Currently, a lot of lenders are concentrating on candidates with better credit scores and ability to prove revenue through The Work Number and established payment patterns via financial transaction data. Both for businesses and employees, The Work Number serves as a central repository that offers services for earnings and employment authentication.
The CARD Act still allows you to identify some alternative income sources on your business credit application to help you qualify, despite the heightened emphasis on income verification. They consist of:
- Unemployment compensation
- Household income
- Returns on your investment
- Revenue from rental property
- Trust fund distributions or bequests
- Any child support payments you make
- The alimony payments you get
- Social security contributions
- Government help
- Payments made to retirees
4. Apply for secured credit cards
Try applying for secured cards if you don’t believe your present income is sufficient to get authorized for a bank card immediately now. Since there are fewer severe limits for revenue, these accounts are typically simpler to qualify for.
You can keep improving your credit rating with secured cards just like you would with a regular credit card, but you’ll need to make an upfront, partial refund that serves as your available credit.
As a result, your credit limit will typically be reduced, but it’s a useful first step in the process of being eligible for business credit.
5. If you’re turned down, try other credit-building options
Don’t give up if your application for a credit card is denied. To improve your credit score, you might have to put in a bit more effort. In the interim, think about other credit-using choices, including a secured credit card or a credit-building loan. You can utilize these modest personal loans to start and/or improve your credit by making on-time payments.
You could try the authorized user option if you’re unable to get a card because you’re under 21, the age restriction for obtaining credit cards imposed by the 2009 CARD Act. You must do this by requesting that your parents add you as an authorized user on one of their cards.
Although you wouldn’t be liable for any debt amassed on the card, you may profit from their prudent card usage. This can serve as a preliminary step in later receiving approval for a business credit card of your own.
6. Before applying, carefully compare card offers
Companies that issue credit cards frequently alter their credit card offers. Even while they may not make it clear what credit score they want from customers, many of them do provide a rough range that shows who the card is best suited for.
A credit card provider might, for instance, provide customers with good or fair credit with a cash-back card with one rewards rate while saving a card with a greater rewards rate or better benefits for customers with excellent credit. You can reduce the search to the options for which, according to your creditworthiness, you’re the best fit by doing your study and homework.
The list can then be further streamlined by choosing the cards that best suit your requirements. If you have a balance, for instance, you might favor a card with a low annual percentage rate (APR) on purchases. Instead of cash-back incentives, you might prefer a credit card that offers travel miles or points.
Keep in mind to go beyond credit ratings and take into account any additional specifications a lender may have such as minimum income requirement.
Additionally, compare the card alternatives provided by your bank to those promoted by other banks. If you have a solid banking experience with your financial institution or credit union, being approved for a card can be simpler.
In any case, study the APR and charges of any card you are considering so that you are aware of how much the card will cost you.
Make the necessary efforts to show up in your credit score
Continue building excellent credit habits in the interim, such as paying bills on time, and think about signing up for a free credit monitoring service to keep tabs on your development each month.
In time, you’ll be eligible for the business credit you’re worthy of!
Atreyee Chowdhury is a freelance content writer with more than 10+ years of professional experience. She is passionate about helping SMBs and enterprises achieve their content marketing goals with her carefully crafted and compelling content. She loves to read, travel, and experiment with different cuisines in her free time. You can follow her on LinkedIn.