One of the things lender looks at before giving you a loan is your credit score. The higher your score, the higher your ability to borrow more. I started building mine during my first year in the university because I knew I was going to need a loan to add up with my savings in order to start my first business.
In this article, I am going to share my personal experience and how you can replicate it.
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Table of Contents
What is Credit Score?
Credit score is the way to measure how reliable you are in terms of paying off your debt. It a record of how well you pay back your loan or your loan repayment history. It is like trust; it take long to build. Your credit score determines your credit worthiness and your ability to pay back loan.
Why does it matter?
If you have any intention of taking a Student loan, Car loan, house loan or any form of loan, then you need to build your credit score. If you don’t build it, you might just be placing some limit on yourself; because without a good score, you may not be able to get the amount you desire when you truly needs it.
Source of credit scores
These scores are gotten from your loan repayment history at:
- Credit companies
- Mortgage banks
- Financial institutions
- Mobile app lender, etc.
How to Improve your credit score?
Creditors will like to lend to people that they are confident will pay back their loan on time and in full. So, it is important to develop a credit repayment culture that will enables you to pay back loans on time, which will in-turns allows you to have a good score.
To be truthful, having a good score does not means you have money; it all about debt and how you deal with it. To have a good credit score, you have to borrow and you have to develop a good repayment plan to help you pay back your loan on time. Below are the three step I used to build my credit score:
1. Planning ahead
I knew, I wanted to own many startups after graduating from college, so I started planning early; the first thing was to develop a plan for my business, the second was drawing up a funding plan; part of the funding plans indicated that I needed to get at least up to 40% of my startup capital from loan, the third thing was developing a list of available loan/credit companies and studying their interest rate and repayment plan.
2. Taking My first Loan
After about 3 days of studying two of the Credit companies on my list; I decided to take my first loan. The application process was very easy and the repayment plan was 60 days; I paid back the loan in full in advance after 40 days, applied for another one, paid back in full after 40 days and got another one (the process went on and on). The good thing was that, my score and my borrowing limit increases after completing the loan payment for each loan tenure.
Because of that, I was able to get a good loan to established my very first business (a standard restaurant ) close to the university during my second year in the university. The restaurant served as a gateway to my other chain of restaurant and relaxation spot inside the campus and in the community.
3. Building an Investment portfolio
The other thing that helped me was investing in some credit companies/loan apps. I discovered earlier that most of them had a saving plans that pay interest more than the bank. So instead of saving my money in banks, I push almost all my savings to different loans app. (If you don’t know where to start, Click here to study if this one will be good for you)
Since credit score is about trust, having a sustained and a long term saving plans with my credit/loan companies assisted me to access loan of up to 6 figures.
You can start by getting a list of credit/loans companies, study their repayment plan, review their saving and investment options and start investing in them. Investment options are good for a start if you don’t have any need for cash, but if you have a pending business plan, getting small loans that you can easily repay will go a long way in establishing some good foundation for your business and in also increasing your credit scores.