As many people know, making a simple inquiry into your credit rating can impact your credit score. However, any incident of you being unable to pay your creditors in a timely manner will create the hardest knocks against your credit history. Late payments to those you borrow money from is a credit score’s worst enemy.
35 percent of your credit score is your payment history.
According to LaToya Irby on About.com, “thirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will hurt your credit score. Pay your credit card bills on time to preserve your credit score.” Of course, even worse than making payments is the act of not making payments at all. Irby comments on the problems that this gives borrowers as well.
“Completely ignoring your credit cards bills is much worse than paying late,” she informs, “Each month you miss a credit card payment, you’re one month closer to having the account charged off.” She goes on to explain that a “charge off” occurs when creditors are of the mind that you’re not going to be able to make any payments. They then make withdrawals from your bank account which is horrible for your credit score.
How does having high credit balances impact your credit score?
According to Irby, a high level of debt is the second most important part of your credit score. “Having high credit card balances (relative to your credit limit) increases your credit utilization and decreases your credit score,” she reports, “Maxed out and over-the-limit credit card balances make your credit utilization 100%. This is least ideal for your credit score.”
Keep in mind that with a merchant cash advance, you are not borrowing any money. The money is being advanced to you as a purchase of your future credit card and debit card sales. For this reason, you need not be concerned about the amount of money you are being advanced as it does not impact your credit in any way. The fact that merchant cash advances don’t hurt your credit is one of the top reasons they work as a funding alternative for small businesses.
How do merchant cash advances help business owners avoid hits to their credit scores?
It all comes down to how merchant cash advances are paid back. With a merchant cash advance, you do not have a minimum payment due each and every month. Not only is there no minimum payment, but there is no repayment schedule to follow either. As a result, it is impossible to make a late payment. And, therefore, your credit score is never impacted!
Merchant cash advances are automatically paid back through small percentages of your future credit card and debit card sales. That means that you only make payments after you receive payments first. When you’re making a lot of sales, your payments are quicker. If sales are slow, your payments are slower. The bottom line is that, without a repayment schedule, you never have to worry about being late. And again, your credit score isn’t impacted at all!