Two Easy Tips to Increase Credit Score

You already know the answer before the dainty, quiet, yet proud bank manager comes through the door. “Declined” is displayed on top of the loan application in a dark blood red. You tried your best but your credit score just wasn’t high enough to prove the bank of your responsibility to pay off that loan in the time allowed. Dismayed, you head out the door wondering what you are going to do next. Well look no further! In the remainder of this article, I am going to give you two simple tips on how you can raise that credit score just enough to push you pass that formidable bank loan threshold.

I know this first tip may sound simple enough but pay off those credit cards! This may seem hopeless especially if you have accumulated high outstanding debt on multiple credit cards. However, the best step you can take towards achieving this goal is to make a good solid budget. To make a good budget, take one whole month and track every expense you make, from paying bills to that Extra Large Chili Cheese Fry at the local burger joint. This means you will need to keep track and organize your receipts. Next, decide which expenses are mandatory for you to spend to stay alive and the ones you can cut out of your budget. If you are not able to cover all of your mandatory expenses with your current salary, it may be time to find a second job or lower your rent by finding a cheaper apartment or television service. Once you have made a budget that fits your mandatory expenses, see how much income you will have left over and use that to pay off your credit debts one by one and make sure you keep it off!

The second tip is not only simple as well but it’s also short and sweet! Pay your bills on time. By simply avoiding your living expenses, such as rent, TV, internet, water, electricity, etc., you are drastically reducing your credit score. Not only that, but you are also showing potential loaners that you can’t even pay off your own living expenses, let alone the loan deal you. To fix this problem, make a budget as before!

My granddad always liked to say, “Budgeting will get you farther in life than a college education.” Now, that might have held true back in the 1950’s, however, it still holds true today! If you are willing to track your expenses and income, then you will not only be able to pay off your already existing debt, but you will also be able to continue to keep it off, drastically improving that credit score!

Effectively Manage Cash Flow

While many figures can help project the overall success of your business, one factor can cause even successful businesses to fail: negative cash flow. Businesses receive cash through the sale of their goods, services, or investments but they use it to pay for their operating expenses, purchase of assets, and to pay off debt. Maintaining positive cash flow is a necessary component of running a successful business.

Project Sales

One of the first steps to positively manage cash flow is to accurately project sales. This allows you to make an estimate on the funds that are likely to come into your business. Complete this task by comparing your numbers from the last few years. Estimate the amount of sales that you expect to have for each month. Remove those sales that will be on an accounts receivable basis. With these accounts, determine how long it usually takes to receive payment and log this information with the cash sales you expect to have.

Determine Expenses

Include a line item budget that shows the expenses that you will pay for each month. This includes employee wages, insurance, mortgage payments, utilities, asset purchases, professional fees, debt payments, costs to advertise, maintenance expenses, and costs for materials. Specify on the budget when these expenses will be incurred so that you can be sure to properly plan for them.

Improve Receivables

A fundamental way to improve your cash flow is to get paid for your goods and services faster especially if you have had a history of receiving payment on a delayed basis. There are several ways to accomplish this goal such as issuing an invoice promptly and delivering it by email or fax. Customers may be required to make deposits on purchases so that you can receive at least part of the payment upfront. Conduct credit checks on customers who want credit extended to them. Follow up on those payments that seem delayed and avoid offering credit to slow-paying customers in the future.

Establish a Back-Up Plan

Even the most savvy business owner may experience a shortfall due to an unexpected expense or factor outside his or her control. After all, the business owner is basing cash flow on estimates and projections, not exact data. There are ways of handling such shortfalls such as keeping an open line of credit available from the bank or asking suppliers to lengthen the payment time frame.

Sometimes You Need a Bridge

A bridge loan, that is.

A bridge loan is also known as an interim loan or gap financing. It is used mostly in real estate but can also be used for other purposes. Bridge loans help those who are selling one home and buying another to borrow against the current equity to finance the down payment of the future home. The time frame to pay back these types of loans is typically 6-12 months. Interest rates for these loans are usually 1-2% higher than fixed interest rates.

For a business, a bridge loan is helpful when an owner is waiting for a round of equity to close but needs cash now in order to keep things running smoothly. A bridge loan for a business can only be 60 days sometimes. He could ask an investor to loan him with how much he needs to manage the business efficiently and pay back the money when the equity closes.

However, if you are asking a bank for a bridge loan, as a business or home owner, you will need to have sufficient cash flow or the loan application is likely to be denied. As a homeowner, the bank will look closely at your debt-to-income ratio which has a general guideline not to be above 36%. The bank will also have your current home appraised and check for any existing loans of the house. All of these will help determine if the loan is approved, and if it is, what amount the bank is comfortable lending you and what your payments will be. Most homeowners end up with two house payments for a short time.

As a homeowner or a business owner, you’ll want to be sure that your loan is structured to your unique needs. Some options include no payments until the end of the loan and others allow paying only on the interest of the loan until the loan is due in full. Be sure to do your research and ask your lender what options are available to you.