Essentially only a 3 digit number, a credit score is indicative of a consumer’s creditworthiness and
evaluates his probability of repaying his debts.
Every person applying for business funding is mindful of his credit score. Not only do lenders check the same, but these days companies giving you jobs and landlords giving you houses closely observe your credit score before offering you a position or place to live in.
Checking your credit score can be done through a hard inquiry as well a soft inquiry, depending on why it is being checked.
Soft inquiries are all credit inquiries (yourself, landlords, job offering companies checking your score, etc.), where your credit is not being reviewed by a prospective lender.
Hard inquiries are where potential lenders are reviewing your credit (when you apply for an auto loan, mortgage or credit card) because you need them to finance your business.
While inquiries may or may not affect your credit score, you can be certain that soft enquiries do not factor into your credit score calculation in any way.
Hard inquiries, on the other hand, take less than 5 points off your score. Each application, business loan or otherwise, can result in the downfall of your credit score, making you look like you have a desperate need to borrow money, putting you at a credit risk.
While one hard inquiry may knock a few points off your scores, multiple inquiries, in a short amount of time, may cause much more damage. The following inquiries can be factored into your credit scores:
- Number of recently opened accounts
- Number of recent credit inquiries
- Time since recent account opening
- Time since credit inquiry
Building your credit score is the key to good business funding, as your credit score does play a big role in your financial well-being. Thus, it is vital to keep checking and maintaining your credit score regularly, using online tools. Do not forget to also keep a track of hard inquiries that may influence the credit score of your business.