Accounting & Finance
Why America’s Peak Credit Score is Good for Business
Did you know the average credit score (FICO score) in the USA as of 2021 is now up to 714? However with high inflation, it is likely there will be consumers falling behind on credit card repayments.
Many other countries operate under similar credit score systems. One example is Norway.
However, having suffered at the hands of FICO’s unforgiving points system for so many years, it seems America’s credit rating is up. This can only mean good news for anyone looking to expand their business.
Current U.S. credit rating context
According to Bloomberg, around 200 million U.S. consumers have a registered FICO credit score and just under three million, which is around 1.4% of the population, have managed to secure a perfect 850. Essentially, these statistics indicate that America could finally be approaching what might arguably be defined as a peak credit score.
What are the benefits for those with a small-to-medium-sized business to manage if this is the case? Well, quite a few, actually…
Credit cards and loan approval
Let’s be nice and clear from the start. Even with an 850 credit score, you shouldn’t assume that any credit card or loan application will be automatically accepted. Most lenders still consider other factors , including income and current debt obligations.
However, a high credit rating is preferred by lenders, and it will open doors for you so you can invest in your business.
The power of negotiation
One of the most crippling aspects of managing a business can be the interest rates on credit cards and loans. However, suppose your credit rating happens to be following the nation’s present trend. In that case, you’ll likely be able to better negotiate and bring those high-interest rates down to an acceptable level. You’re also likely to benefit from a greater quantity of offers suddenly made open to you, which are hardly ever made available to those with poor credit ratings.
Higher limits
On a similar note, banks and money lenders tend to keep a tight rein on the amount of money they’re willing to lend people with low credit scores. Any business expansion that will positively impact your reputation, staff morale, and profit will need a lot of capital. Suppose you’ve been feeling frustrated and unable to take your company to the heights you’d like to in recent years. In that case, it might be worth testing your current credit score to see if you, like many Americans at present, are in the right kind of position to really push forward with significant developments.
Cheaper car insurance
Some businesses would really benefit from cheaper car insurance. Suppose you offer your employees company cars or regularly deliver products to customers. In that case, a higher credit score means that insurance companies will likely offer you less to insure all vehicles to the required standard. Indeed, you may want to revise your options if you currently send your products to customers by outsourcing to an external delivery company. Cheaper car insurance options could end up making the management of your own fleet of vehicles the more viable and reliable option.
While the benefits mentioned are by no means exhaustive, they indeed begin to illustrate the extent to which business expansion poses less of a problem to those with good credit scores. If America’s current trend continues and credit score remains high across the country, we might experience a real boom in financial and creative business success again. So, don’t let your business be left behind. Start investigating your credit options and where you can invest in your business to grow and scale as and when required. Did you know many top tech entrepreneurs started their businesses in tough trading conditions? Investment in R&D and innovation is happening – you’re just not hearing about it until there’s a product ready to be commercialized.