Your credit score significantly controls your credit limit. When running a restaurant or a resort, loans are vital for survival. With a higher credit score, you can get a larger amount of funding and even secure unsecured loans. So how do you maintain that credit score?
1. Watch Your Credit Utilization Ratio.
This is a representation of the total amount of credit acquired. It’s usually written as a percentage of the total credit. Consumers with a low credit utilization ratio have a higher score than those with a high one. Consumers that use a significant part of their credit are labeled ‘risky borrowers.’ Creditors like to deal with those that maintain a ratio of about 30% and below. Try to keep your ratio below this threshold.
2. Eliminate Your Credit Card Balances.
Some hospitality loans such as the working capital loans are tied to the owner’s capital. Your hotel might get credit depending on the number of credit balances and cards that you have. Having too many credit cards instead of one, with a favorable interest rate, can hurt your score. The score considers the total amount of credit balances in your company’s name. The strategy is to pay up all small balances in your cards and choose at least two cards for use. This will lower the pollution of your score, and consequently, you will have a higher borrowing capacity.
3. Leave Old Debt on Your Credit Report.
Most people believe that old debt on their business credit report can harm their score. Once they pay up their previous loans, they rush to get it removed from their credit report. Bad debt will hurt your score as it can remain there for up to seven years. Good debt, on the other hand, is healthy. A longer good debt history will raise your credit score.
These few tips will raise your score and help secure more loans. Purchasing state of the art equipment for your business becomes easier than snapping your finger. With more loans, your hotel business will flourish in the face of hardships. That said, it is vital always to get your credit report frequently so that you can keep tabs on your score.