The concept of a credit score is often a confusing one for business owners. A credit score is a numerical value – usually between 300 and 850 – that banks and lenders use to evaluate an individual’s creditworthiness. Generally speaking, higher scores indicate more desirable characteristics like on-time payments, consistent income, and sound debt management. On the other hand, lower scores may suggest riskier behavior such as multiple missed payments and an inability to handle debt properly.
What Affects Your Credit Score?
Your credit score is based on a number of factors, including but not limited to:
- Credit utilization ratio: This is a record of how much of your available credit limit you have utilized.
- Payment history: Regular, on-time payments can help boost your score, while missed payments can damage it.
- Amounts owed: How much debt you’re carrying.
- Length of credit history: A long history of paying bills on time could be beneficial.
- Types of credit used: Having several different types of credit can help