YOUR CREDIT CARD OUTLET

My husband and I have good credit, but we only have one income to speak of….?

I am looking to start a small buissnes and I am trying to determine which way would be the best way/ cheapest way to get finincing. (I realize that if I try to get a loan from a bank I will need to have a solid buissness plan and I have one in the works, and I am positive that they will see the buissnes as a profitableone!)We have a very small amount of money to put down on a loan. Our credit ratings are in the 700′s but I have some Credit Cards open that have no balance and haven’t for a year or so, should I cancle them, do the banks look at the line of cridit we have in the cards and concider that bad, or good?does that determine the $ amount that we have to put down on a loan? I have gotten all differnt answeres from friends. I can cancle the cards but I also heard it was bad to close lines of credit. Also we have never had a bill go to collections, let alone be late.

You will probably need to have a fair amount of money saved up or invested before a bank will loan you any, unless you have collateral (like a house or car) to secure the loan. If you don’t have much saved, I would suggest hitting the streets and asking friends, family, etc. Also, if you have an “innovative” business, search for angel investors (a google search should give you some local ones). These investors look to invest in innovative concepts or new companies that have a large growth potential.

Once you have enough cash accumulated to get the bank to talk to you, the bank will want to see a solid business plan with realistic, conservative projections. Once you have that, banks will also want to see a solid credit history. You sound like you’re well on your way to that, but there are a few things you can do to improve your score.

First, pay down any balances on Credit Cards or loans. Second, DO NOT cancel any Credit Cards. That is a huge mistake that many people make, and it can lower your score significantly because the credit score is based on a “credit utilization ratio” or how much you borrow divided by the total lines of credit. I.e. if you have cards with $3000, $5000, and $2000 limits, and have a $1000 balance on the $3000 card, and $0 balance on the others, you have a 10% ratio ($1000/$10000). If you close the unused accounts, you will have a ratio of 33.3% ($1000/$3000). The score also takes into account the average age of credit lines, so don’t apply for any new credit before you go to the bank.

All in all, sounds like you’ve done about all you can on the credit score front. Just pay down your debt if you have any.

Good luck with your business plan!

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