Hello founders and non-founders! Yes, I discovered that not all our readers have their own business yet, which is fine. I hope you find the courage to start your ‘own thing’ soon, if you have it in your plans to own one.
Today’s discussion is a little different. It is not about fund raising or asset definition. It about your financial health as an individual or that your business.
Now imagine taking your financial life to a financial doctor. After close examination, the doctor would give a report of the various tests to be carried out. The diagnosis could either be good or bad, or somewhere in between (I know actual doctors would roll their eyes on reading this as there’s probably no test report that would be interpreted as ‘in between’ 🙂 ).
We all know good is always desirable at least above bad. Now, how do you get that good report?
What a Credit Score Is
I define credit score as your assessment result after going through a financial doctor’s examination.
The following are some of the tests conducted:
1. Debt Repayment History:
Now, no one is condemning you for borrowing money yet, as long as you borrow money for the right reasons. So, are you a good borrower? Do you repay your loans as scheduled
2. Your Asset to Cash:
As a financial doctor myself, I would examine your asset to cash. I would examine how well you manage your resources especially cash, I know a lot of people feel comforted when they have a lot of cash in hand but I am going to advice that you invest your cash! Invested cash becomes asset. Hold on, I am not saying convert all your cash to asset — there is a process for this conversion. Your budget will mostly determine how you should make decision. We should talk about that soon.
3. Purposes of Loans:
I would also check what you use loans for. As a business person, if I were to be your investor, I would want to know how well you utilize the money you raise.
Why You Need a Good Credit Score
You need a good credit score for several reasons:
1. Access to more loans
2. Some job interviewers check your credit history.
3. Your financial score can reveal the level of your financial prudence.
4. My guts tells me that some countries might require this from an immigrant. Who would want a debtor for an immigrant?
Some Ways in Which You Can Improve Your Credit Score
1. Pay up your loans on schedule
2. Utilize loans for the purpose you got it, for example, do not use a loan disbursed for your business to party.
3. Learn to save. This also improves your score. It shows a sign of financial discipline.
We will draw the curtain here today. Thank you for reading through.