Getting your credit in order

Get to know what impacts your credit so you can plan to grow your business - profitably.

Chapter 5: Credit factors and action steps

You have to make opportunities for your business to grow when you're self-employed. Oftentimes, that means using credit to get on your feet.

Get to know the five factors that determine your credit score in this chapter's enlightening conversation. As in previous chapters, use the Financial Foundation for Freelancers worksheet to help you learn and remember what you can do to improve.

Know your credit

Your credit score is built from five factors: 

  • Payment history (35%)
  • Credit utilization ratio (30%)
  • Length of credit history (15%)
  • Credit inquiries (10%)
  • Credit mix (10%)

This data feeds into a credit report. The report indicates how responsibly you pay your bills and loans. If you have a history of consistently missing payments and you max out your credit cards, you should anticipate a low credit score. On the other hand, if you make your payments on time and you stay under 30% of your credit limits, you'll have a higher credit score

A higher credit score is great. But, if you have a lower score, it's not the end of the world. You may make adjustments to improve your credit relatively quickly

Know what factors into your credit and make a plan to maintain or raise your score

Your chapter 5 checklist:


Video Transcript

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

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