Present Mistakes That Could Create Huge Problems for your Future Business

A human being is a social animal, and when it comes to being a part of society one cannot just act as pleased. Your activities and behavior give people an idea about your character which creates a general opinion about you, also known as reputation. A good reputation determines your influence over society and can make many services easily available to you. Though it is a dynamic quality when it comes to people, but in the world of business and finances, it’s a different story.

When you start setting up your own business, getting investors to provide funding is a very difficult task without a proper setup and not everyone is privileged enough to possess assets that have a good market value so that they can obtain loans from banks by using assets as security. The only feasible option to obtain money without any collateral is through unsecured business loans. These loans provide funding to many new startups so that they can expand their business without the need to submit something as collateral. The bank or the financial organization provides this loan by assessing only one parameter “your credit score”.

Credit Score:

A credit score is a parameter that influences your reputation in the financial world by giving information about the risk a lender would face while giving you money. There are other bureaus also like Experian, CRIF High Mark, and Equifax. Every bank, financial organization, and investor check your credit score before providing you any financial assistance. A CIBIL score is affected by some factors related to the behavior of the borrower:

• Credit History: Your past credit track record has a weightage of around 30% in the formula for calculating your CIBIL score online. The information about your timely payments delayed payments, settled and written-off amounts of your bills and EMIs during the latest 3 years has a major influence on your credit score.
• Credit Utilization: The level of your credit utilization is calculated by your current outstanding loan obligations divided by your available limit. A high and rising credit utilization ratio may harm your score as it signifies your rising loan burden. The credit utilization ratio has a 25 % weightage in the CIBIL score calculation.
• Credit Mix: The proportion of secured and unsecured loans also has a bearing on your score. If your loan portfolio has a higher proportion of unsecured loans then it harms your score. Credit Mix has a weightage of 25% in CIBIL score calculation.
• Other Factors: If you are rejected by many banks for loan applications this could also reflect a bad impact on your credit score. You should apply for a loan after researching thoroughly the schemes different banks offer based on your credit score.

A bad credit score slims out the chances for any new entrepreneur to obtain an unsecured business loans. Nowadays many businessmen also look at your credit score to decide whether to do business with you or not, knowing the factors which affect the score you should carefully plan your financial habits for future benefits.

Overview:
A good reputation really increases your chances when it comes to utilizing some services. In the financial world, a good reputation is determined by a good credit score. Many banks and financial organizations determine your eligibility for granting loans, especially for unsecured loans, by your credit score also known as CIBIL score in India. Some financial habits act as factors that affect your CIBIL score like having a bad credit payment history, a high-end credit utilization, having more unsecured loans in your loan portfolio, etc. You can improve your credit score by keeping a check on these factors so that it can boost up your chances to get a loan whenever there is a need.

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