Understanding how your credit is affected, how long derogatory marks stay on your history, and what you can do to better your score are all important. Acknowledging the ways poor credit could affect you will help you make a plan to clean up your score to obtain the things you want. It’s important to note that these tasks may be difficult to complete with a lower score, so prepare yourself for what needs to be done.

Opening a Business

This has certainly been a year for entrepreneurship, as people have had more time to soul-search than ever with the stay at home orders. If you are planning on opening a business, you need to understand the ways your low credit score could affect you. When you apply for business loans for supplies, space, or employment, you may be denied or given a loan at a high interest rate. Banks and money lenders want to protect their businesses against potential delinquencies.

If you are having trouble finding a loan that works for you, consider the ways to start smaller and work on cleaning up your credit. Many lenders will work with you as long as you are able to abide by an established set of requirements. After making your payments on time and showing that you are a reliable loan recipient, you can think about refinancing after months of consistency.

Applying for a Mortgage

Lenders will look at your credit score and payment histories to determine how dependable you will be at paying your mortgage, given the opportunity. Even if years back you failed to make your bills on time, if your report shows an upward trend, you’ve got options. Becoming more consistent with paying what’s owed will show that you are understanding the importance of money management.

Applying for a mortgage loan can be more difficult with a lower score, but not impossible. Work with a loan officer to help you determine what is required for you to be able to get a loan that works for both parties. Obtaining a copy of your credit report will allow you to see what lenders are looking at. If you’ve paid off something that still shows derogatory on your history, you can contact the company and ask for a “letter to delete,” taking it off and deeming it resolved.

Applying for Credit Cards

One of the best ways to start to rebuild your credit is to open credit. If your score is very low, you may need to consult a professional to help you find a credit card company that will approve you. If you are able to find one on your own, try and apply to the ones that offer no interest for the first year or more.

The card will likely have a low credit limit, such as $150-$300 available. Use it for small stuff such as gas and groceries, and instead of paying the minimum every month, pay the full balance. This is a good way to build credit. As you show responsibility, other credit card companies will start sending you offers for their cards. Remember that there is a fine line between a few ways to build credit and too much open credit. Open what you need to help yourself dig out of the low score hole, but don’t bite off more than you can chew.

We all started somewhere. Understanding ways poor credit could affect you will help you prepare for what will be necessary to move forward personally and professionally. Don’t be afraid of open conversations with money lenders—even if they can’t secure you with the loan you want, they can tell you what you need to get there.