Preferential financing options grow with stronger credit scores.

It’s a simple three-digit number that can make a difference worth thousands of dollars in how you finance and manage your ag operation. Knowing your credit score is important; but even more critical is knowing how you can improve it. Improving your score can help in the long run so finance charges don’t add up and erode the revenue potential of your farm or ranch.

A credit score speaks to the management of both your business and your personal spending.  Lenders consider it an indicator of the financial management risk that you present to them as a borrower.  Unlike years ago, nearly all providers of credit (including leasing companies) provide payment history information to the credit reporting bureaus.  The higher your credit score, the lower the risk, which usually manifests as lower finance charges, fees and rates.

Credit scores range from 300 to 850 and are provided by three credit reporting bureaus — Equifax, TransUnion and Experian — and contribute to an overall credit report from the Fair Isaac Corporation (FICO® Score) that ultimately becomes a financial scorecard on which future financing decisions are based. Each of the three bureaus has a different reporting structure and process, but all should yield a number in the same range. Anything over 700 is typically considered a “good” rating, while anything below 640 is a call for adjustments to improve your operation’s risk characteristic.

What goes into a credit score?

A credit score accounts for any open account, from a revolving credit account for farm or ranch operating expenses to individual consumer spending, tax or utility bills to tax liens or other matters of public financial record. Every taxpayer has the ability to obtain his or her credit score once a year, and all inquiries are monitored and accounted for in one’s overall credit scores. That’s why it’s important to be prepared to take specific action if improvement is warranted when you review your credit score.

When a borrower seeks financing, the lender requests a credit report from one or a combination of credit reporting bureaus to gauge that borrower’s commitment to timely payment of his financial obligations and determine the fee and rate structure for financing requested.

Common credit score issues

Maintaining a healthy credit score can, in some circumstances, pose a challenge. For young and beginning producers, achieving a high score is imperative to secure financing to build up the line of machinery and equipment to sustainably operate a farm. But in many cases, it takes years to establish a credit score, and if it needs improvement even longer to re-establish strong credit.

In most cases, building a farm business requires accumulating debt. That’s another scenario in which a young or beginning producer may have difficulties stemming from poor credit ratings. Even though they’re leveraging lender financing to build a business for the long term, their credit scores suffer in the short term if that financing is accompanied by low levels of unused credit or there are any delinquent payments in the mix.

If you’re a more established producer, how you make big-ticket purchases also can affect your credit score. When purchasing something like a piece of land or large machinery, your lender is likely to check your credit score with at least one of the three credit bureaus. Repeated credit inquiries in rapid succession can have an adverse effect on your credit score.  While it may be tempting to take advantage of offers from credit card companies, moving one’s balances from one company to another can adversely impact the score.

How can you improve your credit score?

There are many steps you can take to improve your score. A good starting point is a thorough audit of your credit accounts. Knowing your overall available credit compared to how much you have borrowed will go a long way in determining how you manage your accounts to raise your score. As a rule of thumb, the further away your borrowed amount is to the maximum afforded by each account, the better. For example, financing $100,000 from an account with a $200,000 limit will have a more positive effect on your overall credit score than financing the same amount from a $125,000 account.

Managing your existing credit is an important way to maintain a high credit score. If your credit score is strong and you have open credit on a reasonable number of accounts that are carrying no balance — provided you’re not paying finance charges to keep open accounts you’re not using — keep it open. This is especially true when it comes to high-limit revolving credit accounts; the more available open credit you have, the better…in the long run (because of the credit inquiries required when opening a new account, the short-term effect can sometimes be negative).

If your credit score is lower, check with your bank to learn how exactly opening new accounts might affect your score. In some cases, doing so can adversely affect your credit utilization ratio and as a result, your overall credit score.

And when you do have credit balances, try to pay them off as quickly as possible. Paying off credit statements in full can help boost your credit score.

In the end, though, the #1 way to have excellent credit, as measured by the credit score, is to pay your bills on time!

The right ag lender can help.

A farm loan lender that understands agriculture can structure the terms of your farm loans in a manner that best fits your cash flow, making sure funds are available when debt payments are due.  The farm budget that underlies your borrowing likely has considered family living expenses and associated credit card debt.  Here again, the right lender can provide helpful insight into how the family living expenses fit into the farm business’s cash flow.  

At Conterra Ag Capital, our agriculture lending specialists can offer ways to build or maintain your credit score based on your specific operation. We know agriculture, and our experienced team is ready to work with you to accomplish your operation’s goals. Get in touch with Conterra Ag to start the conversation today, or learn more about our lending solutions

*Disclaimer: Conterra Ag Capital is not a law firm and cannot give legal advice. Information provided on this website is not intended to convey or constitute legal advice. If you need legal advice, you should consult a qualified attorney.

About Conterra Ag Capital

Conterra Ag Capital focuses exclusively on agriculture, loan servicing, alternative lending and asset management to institutional investors, banks and other agricultural lenders throughout the United States.

Conterra Ag has loan tools to help meet the challenges of today’s agricultural environment:

• Long-term fixed rate loans

• Flexibility through revolving line of credit loans

• Restructuring debts to improve cash flows

Conterra Ag’s staff of seasoned ag lending professionals will quickly respond to your inquiry. To learn more, contact Conterra Ag by phone at 855-888-1675 or by email at

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