How to Improve Your Credit Score Before Applying for a Commercial Loan

Your credit score is one of the primary factors lenders will consider as they review your commercial loan request. If you have experienced financial difficulties in the past -- such as a bankruptcy or foreclosure -- or you have simply fallen behind on making monthly payments, this aspect of the process could become a major hindrance as you work to secure mortgage financing.

Thankfully, there are steps you can take to improve your credit score. While you may not see a major change immediately, these practices can put you in a better position to be approved for an attractive commercial loan.

Pay Off Your Debts

Take a look at the amount of debt you owe compared to your current credit limit. Are you utilizing more than 30% of your available credit?

Most experts agree that utilizing more credit than that can trigger a warning for lenders. So make an effort to lower your ratio, either by paying off more of your balance each month or simply by using a smaller portion of the credit available to you.

Check Your Credit Reports for Errors

Credit report inaccuracies affect a large portion of Americans’ scores each year. There could be a mistake on one of your reports right now that is dragging your score down.

Correcting an inaccuracy may not have a huge impact on your credit score, but every little bit helps. You can request a free credit report from each of the three credit bureaus (Experian, Equifax, and TransUnion) once per year.

When you analyze your report, pay special attention to the sections listing transaction information, such as missed payments. Errors in these areas are likely to have the biggest impact on your credit score.

If you do find inaccuracies in your free report, be sure to contact the appropriate bureau right away to correct the issue.

Commit to Paying Bills on Time

Lenders need to have faith in a prospective borrower’s ability to make monthly payments throughout the life of their commercial investment loan. Those who regularly fail to pay bills on time are not going to help their case.

Missed payments not only raise red flags for lenders, they also damage one’s credit score. So be sure to keep your payments current by taking some of the following steps:

  1. Set up a monthly reminder

  2. Sign up for auto payments

  3. Consolidate bills when possible

Limit Credit History Inquiries

Applying for a loan will trigger an inquiry into your credit history. If lenders make repeated inquiries, your credit score will eventually fall.

If you need a commercial real estate loan, you will not be able to prevent a credit history check. But you can limit the number of inquiries by only applying for credit you need.

Following these tips may not increase your credit score overnight. But they are habits that will help you maintain a higher credit score over time. That way, you won’t have as much to worry about when a lender reviews your finance request.

Of course, even borrowers with less-than-stellar credit can still secure commercial mortgage financing. If you’re interested in learning more about some of the alternative lending solutions available in your area, be sure to reach out to our mortgage expert team here.