You’ve finally decided it’s time to start your own veterinary practice, and of course, you’ll need to secure financing. Let’s say you’re still in significant debt from your student loan. How will your credit profile impact your ability to obtain an acquisition or start-up loan with reasonable interest rates?
Good credit is the basis for all your financial investments, whether buying or building your first animal hospital or home. While lenders look at several factors when making a credit decision, your debt is the most critical aspect of your financial profile. Debt includes student loans, credit cards, lines of credit – and your overall credit rating.
Lenders make credit decisions for practice acquisition loans based on assessing practice cash flow and the borrower’s ability to repay the loan while covering expenses and lifestyle. Lenders make credit decisions for practice start-up loans based on the borrower’s debt-to-asset ratio. The amount of your debt will factor directly into both equations. Generally, a low level of debt yields a higher credit limit decision, while high debt results in a lower credit limit determination.
Following are ten simple steps you can take to improve your credit rating and ensure a healthy financial profile:
- Maintain at least two or three revolving credit accounts (such as credit cards and lines of credit). Wisely managing debt indicates you are creditworthy.
- Avoid applying for credit from too many lenders. Multiple credit inquiries made within a short timeframe will negatively impact your credit rating.
- Demonstrate that you know how to use your credit wisely by not using all the credit available.
- Make on-time monthly payments on credit cards, mortgages, installments, and student loans. Remember, most service providers, such as doctors’ offices, cell phone companies, and health clubs, report late payments and collections to credit bureaus.
- Consolidate your loans to improve your cash flow and generate a better financial profile.
- If you are in dispute with a creditor, continue to make minimum monthly payments while you work towards a resolution.
- Notify creditors in writing of your address change.
- Avoid co-signing and guaranteeing a loan for a friend or family member, as it has the same impact on your credit as being the primary borrower.
- Protect your identity. Review your credit report at least twice a year to ensure accurate reporting of all accounts. Inform all credit bureaus in writing of any discrepancies.
- Keep copies of all agreements, documents clearing judgments or liens, and letters from creditors removing incorrect information reported on your loan history. Remember, all credit information stays on your records for up to ten years.
Well-managed credit will help you secure the financing you need to purchase or build your own veterinary practice. It’s never too soon to develop a healthy financial profile.
Article by Dr. John Bryk
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