In today’s competitive business environment, maintaining a solid credit history is crucial for both individuals and businesses. A current account plays a pivotal role in facilitating smooth financial transactions, but did you know it can indirectly contribute to building an excellent credit history too?
Although a current account itself does not directly impact your credit score, it provides various financial tools that, when used responsibly, can help establish and improve your creditworthiness. Here are some ways a current account can assist you in building a strong credit history:
1) Access to business loans and overdraft facilities
One of the significant benefits of considering current account opening is that it allows businesses to access various credit products, such as loans and overdrafts. If your business has a current account, you are more likely to qualify for an overdraft facility, which helps manage short-term cash flow needs. Repaying this overdraft on time contributes positively to your credit score, helping you build a strong credit history.
2) Obtaining a credit card
A current account can serve as a gateway to acquiring a business credit card. By ensuring regular payments on your credit card, you can improve your credit score over time. Many banks, based on your current account’s transaction history, may offer credit cards with attractive benefits, allowing you to take advantage of credit responsibly and create a credit history.
3) Loans based on current account transactions
Banks often assess the transaction history of a current account to gauge a business’s financial health before extending loans. If you have regular, stable inflows and outflows in your current account, banks may perceive your business as financially sound, making it easier to secure loans. Timely loan repayments play a crucial role in improving your credit history.
For example, with an IndusInd Bank Indus Max Current Account, small businesses can access loans with flexible terms based on their account’s health. This account requires a low Average Monthly Balance (AMB) of ₹10,000, making it accessible for small enterprises to grow their business while enhancing their creditworthiness.
4) Record of financial stability
Regular transactions and timely repayments in full of the availed loan amounts through the current account demonstrate to lenders that your business is financially stable. This record can enhance your credibility when you apply for more credit, leading to easier loan approvals and better terms, indirectly helping to build a solid credit score.
Ending note
While a current account alone does not directly impact your credit score, it offers several financial tools to help businesses strengthen their financial position. Features such as access to credit cards, loans, overdrafts, and efficient cash flow management can improve your business’s ability to repay loans and manage debt.
Timely repayment of these credit products can reflect positively on your credit report, contributing to the long-term growth and stability of your credit history. By leveraging the advantages of a current account wisely, businesses can not only benefit from smoother operations, they can also build a credit history that can support future financial needs.