So you want a business loan, for working capital, for equipment, or to buy or refinance a building. You have settled on a good use of funds and you are ready to start your search. Before you talk to a single lender, do one thing first: pull your own credit file.
Do not wait for lenders to do it for you. Here is why that order matters more than most owners realize.
You Need to See the Report Before Anyone Else Does
Credit reports contain errors more often than people expect, and they contain old problems that deserve an explanation more often still. If either is sitting on your file, you want to know about it while you still have room to act, to get the error corrected, or at minimum to walk into the conversation with a clear, prepared explanation rather than being caught flat-footed by a question you did not see coming.
A lender reading an unexplained blemish draws its own conclusions. A lender hearing the explanation from you first is evaluating a business owner who knows their own numbers.
Every Lender Pull Costs You an Inquiry
The second reason is arithmetic. Every time a lender pulls your report, an inquiry is posted to your credit file, and inquiries pull your score down. Apply scattershot to eight lenders and you have done real damage to the very file you are asking them to approve.
It gets more frustrating than that. Many lenders will reject an application specifically because the file shows too many recent inquiries, which is to say, they reject you for having been actively looking for a loan. It does not make much sense on its face, but we see that rejection often enough that it is worth planning around.
Knowing Your Profile Gets You to the Right Lender the First Time
Here is the part that turns a defensive move into an offensive one. Lenders are not interchangeable, and they are not all chasing the same borrower.
Some lenders will only work with grade-A credit and price their rates accordingly. Others deliberately seek out weaker credit profiles because they want a higher yield, read that as higher profit but also higher risk, on the dollars they have put to work. Neither is a better lender in the abstract. They are aimed at different files.
When you know your credit profile going in, you or your consultant know which lenders will like that profile and which will not, before an application ever goes out. No surprises on the report means we can choose the right lender the first time, pursue pre-approvals first, and cut down the time it takes to get you an approval. It also holds the inquiry count down, for exactly the reason described above.
This is the groundwork that makes everything else easier. If you want to see the payment side of the picture before you apply, our loan calculator will give you a rough sense of what different loan sizes and terms look like month to month, and our services page lays out the financing programs we work with.
Where to Get Your Report, and Which Score Actually Counts
There are free sites like Credit Karma, plus paid services like CreditCheckTotal, that will give you an accurate credit report. What they generally do not give you is the credit score a lender will actually use. Those educational scores are genuinely useful for finding errors and getting a rough idea of where you stand, and for that purpose they are worth pulling.
But the score banks and lending institutions underwrite on is the FICO score, and the way to get the real one is to go to the source: myfico.com. It costs more than the free options. You get the actual number lenders will see.
In every case, buy the reports from all three bureaus: Experian, TransUnion, and Equifax. Different lenders pull different bureaus, you usually will not know in advance which one, and the three reports do not always match. A significant issue can appear on one bureau and be absent from the other two, and you do not want to discover that from a decline letter.
The Payoff
Pulling your own file first gives you a head start on your next loan, the information you need to fix any mistakes, and control over a document that otherwise gets used to judge you without your input. It is a small amount of work and a small expense, done weeks before it matters, and it changes how the entire search goes.
Ready to start the search, or want a second read on what is in your file? Call 914.419.3059, email mike@ntibfin.com, or book a free consultation and we will go through your credit profile and match it to the lenders most likely to approve you.
Frequently Asked Questions
Should I check my own credit before applying for a business loan?
Yes. Pulling your own credit file before you apply lets you see exactly what lenders will see. If there are errors or unfavorable items on the report, you have time to correct them or prepare an explanation before a lender reviews the file. It also lets you or your consultant target lenders whose credit requirements actually match your profile, rather than finding out after an application has already been submitted.
Does applying to multiple lenders hurt your credit score?
Each time a lender pulls your credit, an inquiry is posted to your file, and accumulating inquiries can lower your score. Many lenders also reject applications specifically because the file shows too many recent inquiries. Knowing your credit profile up front means fewer applications to lenders who were never going to approve you, which keeps the number of inquiries down.
What is the difference between a free credit score and a FICO score?
Free and low-cost consumer credit sites show an educational credit score, which is useful for spotting errors and getting a general sense of where you stand, but it is often not the score a lender uses. Banks and lending institutions typically underwrite on FICO scores, which are available directly from the score provider at myfico.com. You should review reports from all three bureaus, Experian, TransUnion, and Equifax, because different lenders pull different bureaus and the reports do not always match.