If your credit score is low and your financing request isn’t approved, it’s not the Banker’s fault when she delivers the bad news of a loan denial to you.
Your Banker wants to be your friend, your “go-to” financial resource to help you build your business. But there are are areas out of the Banker’s control, not the least of which is your credit history and subsequent credit scores.
Certainly you should be aware of your credit score…with the caution that, as a consumer, you cannot access the true credit scores used in financial services-related decisions. This score is otherwise known as the “FICO CLASSIC” and all the credit monitoring services in the world cannot provide you with access to this score. Thus there can be wide variances between the scores you find online and the “true” score your Banker will pull when you apply for credit financing. In our experience at Aurora Consulting, we’ve seen variances in either direction, positive and negative, as much as 100 points in the scores.
But if you have very low scores, chances are very good that you are aware of your credit history circumstances. That is, scores less than 620, and certainly any scores that are in the 500’s. Many consumers with scores at 620 and above, where they’re not hitting the high-700’s or even the 800’s, tend to believe they have “bad” credit. This is not always the case, and often that kind of score range, down to 620, will qualify for business credit financing.
But if you are fairly certain, even with the incorrect consumer-access scores, that you have credit circumstances that are pushing your scores down below 620, you need to be aware and to disclose that to your Banker.
And you should be specific with your Banker about those circumstances. For example, “I’m currently delinquent on the mortgage on my other house,” or, “I have several small collection accounts from three years ago that I have not yet paid off.” If you’re clear and honest with your Banker about your potential credit history, it helps to manage those expectations, both yours and hers, when presenting a financing request application.
At Aurora Consulting, our process with each client includes a credit report that we run at the very outset of our relationship with the client. Because we’re working on behalf of the client, we have a different perspective on the credit review process. And we actually have successfully placed loans with credit scores in the 500’s. The options in that range can be limited. But there are options. And, like with your Banker, we find it very helpful when the client is clear with us upfront about concerns for their credit history and scores.
Finally, being aware of your credit status is important for you personally and professionally to be aware of how you are managing your money and your bill-paying as you grow your business. When the Banker denies a loan request due to low credit scores, the issue is the lack of awareness of this money-management, not the Bank’s lending protocols.