Coming up with a viable business idea is just the first step in starting a business. If you’re like many entrepreneurs, you may need a business loan to turn your vision into reality. Your FICO score, a metric used by lenders to assess credit risk, can significantly affect your ability to secure this much-needed funding. Here’s how you can improve your FICO score before applying for a business loan.

Understand Your Credit Report

Your first step in improving your FICO score is to understand your credit report. This document, which you can request from any of the three major credit bureaus, details your credit history and includes the information used to calculate your FICO score. Review it for any inaccuracies and file disputes where necessary.

Pay Your Bills on Time

Timely payment of your bills is a hugely significant factor in your FICO score. Missed or late payments can negatively impact your score. Therefore, ensure all your bills, not just credit cards or loans, are paid on time. Setting up automatic payments can help in keeping track.

Reduce Your Debt

The total amount of debt you owe also affects your FICO score. Pay down your balances and maintain low balances on your credit cards. As a rule of thumb, try to keep your credit utilization – the ratio of your credit card balance to your credit limit – below 30%.

Don’t Close Unused Credit Cards

While it might seem counter-intuitive, closing unused credit cards can negatively impact your FICO score, as it lowers your available credit and increases your credit utilization ratio.

Apply for New Credit Sparingly

Each time you apply for credit, it results in a hard inquiry on your credit report. Too many of these can lower your FICO score, so only apply for new credit when necessary.

Improving your FICO score isn’t an overnight task. It requires time, patience, and financial discipline. However, by following these steps, you can enhance your creditworthiness and increase your chances of securing that crucial business loan.