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Having a good personal credit score can make all the difference in acquiring business funding for small firms. For business owners who are sole proprietors, their personal credit is their lifeline to bank loans, online loans and other forms of business financing.

What happens if an entrepreneur has been faithfully making timely payments, keeping debts on credit cards low, and generally practicing good credit behavior but then gets hit with some unexpected medical bills that he’s unable to repay fast enough? Will his credit fall and his business suffer?

Up until 2014, the answer was a definite YES. Fortunately, in September 2014, the Fair Isaac Corp. (FICO) decided to attach less credit score significance to medical debts as these seemed to be less of an indication of credit habits than originally thought. Before that announcement, borrowers with medical debts going into collections would find themselves paying much higher interest rates for other types of loans. Since that decision, those with medical debt but generally good credit histories have seen their credit scores increase, on average by about 25 points.

So while business owners will take a hit to their credit from medical debt, it is not as impactful as it would have been just a few years ago. That slight improvement in credit can mean the difference between approval and rejection for a small business loan or it can mean the difference of one to two percentage points on a loan interest rate. The savings can translate into thousands of dollars on a large loan.

A small business owner can expect to see a decrease in her credit score these days from medical debt, but if FICO is not as concerned about it, chances are that business lenders will be able to see past the nature of that debt as well.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources