Will Applying for a Business Loan Hurt Your Personal Credit Score?
A business loan can be extremely helpful if you are looking forward to set-up a new venture. One of the key factors that impact your eligibility to avail a business loan is your credit score. However, a lesser known fact is that while applying for a business loan, your credit score can take a hit, this can eventually hamper your chances of qualifying and getting the best rates. The impact on your credit score depends on whether the loan-provider does a hard credit pull or soft credit pull.
When you first apply for a business loan for pre-approval or to get a rate quote, most financial institutions will do a soft pull of your credit. A soft credit pull is the type of credit inquiry that does not hurt your credit score. On the contrary, a hard credit pull can lower your credit score by 1-5 points. A hard credit inquiry occurs when a financial institution checks your full credit history when you apply for a business loan.
While a 1-5 point decrease per hard credit inquiry doesn’t seem too much, each inquiry adds up and your credit score takes a hit in the long term. Therefore, it is recommended that should apply with no more than 2 or 3 financial institutions when looking for a business loan. If you apply for too many loans and your credit score takes a setback, as a result of which you will qualify for less favorable interest rates and loan terms. Lastly, as some loan-providers do a hard credit inquiry even to pre-qualify you and give you a preliminary quote, it is advisable that you should be careful before filling out too many loan applications.
Cases when business loans have no impact on your credit score.
To sum it up, there are two cases where applying for a business loan doesn’t hurt your personal credit score. The first is when the financial institution doesn’t check your credit history at all. The second case is when the financial institution resorts to a “soft credit check.”
A good credit score plays a vital role when it comes to applying for a loan or a credit card. However, it is not possible to develop a high credit score overnight. To build a stable credit score, you need to have strong financial discipline.
Leading Non-Banking Financial Companies (NBFCs) like Finserv Markets offer tailor-made business loans to meet all your financial requirements. Whether your business is small or large scale, business loans by Finserv Markets have been designed to cater to all your needs. Low-interest rates, flexible part payments, and unlimited withdrawals are some of the additional features of business loans from Finserv Markets. What’s more? The entire process is completely online and hassle-free. So why wait? Use your credit score to avail a business loan and give your vision a much-needed platform, today!
Finserv Markets, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment, and exclusive EMI store, all under one roof- anytime, anywhere!