Personal Vs Business Credit Scores: What’s the Difference?

Credit scores have become an ingrained part of life. They affect everything from your ability to take out credit, to getting a mortgage and even getting accepted for certain types of jobs.

While personal credit scores are the ones that we are most familiar with, did you know companies also have business credit scores? The two are separate from one another and they factor in different things. Here, we’ll look at the differences between personal and business credit scores and how they can impact your business.

What is a personal credit score?

A personal credit score is used to help lenders decide whether or not to give you credit. It also decides the interest rate you’re offered and can be used to check your eligibility for a mortgage or rental application.

Your score is calculated based upon your credit history. This includes how much debt you’ve accumulated and whether you make payments on time. Different credit reference agencies have differing scores. For example, Experian’s credit score profile goes up to 999. However, if you use Clearscore to check your rating, the number only goes up to 700. So, it can be quite confusing, but generally speaking the higher the score, the better your credit rating is.

What is a business credit score?

Business credit scores work in a very similar way to personal credit scores. However, they are worked out depending on the credit of the business, not the individual. This means, the finances of the business are looked into, rather than the finances of the individual.

This credit score is useful to lenders and suppliers. For example, some suppliers may not want to deal with businesses which have a poor credit rating. The credit score for the company will build up over time as credit is taken out and paid off.

Your score will determine whether the business can borrow money and how much the APR is. Having bad credit will make it harder to get the finance your business needs, but there are bad credit business loans available to those with a less than perfect history.

Can they link to one another?

Although personal and business credit ratings are different, there are situations where they can impact one another. Largely, it’s your personal credit score that can impact your business one.

If you’re a sole trader, when you request business finance, your personal score may need to be used to determine how much you can borrow. Similarly, if you’re in a partnership then your personal credit rating will also be used during applications. Your personal and business credit scores will only tend to remain fully separate from one another if you run a Limited Company.

So, business credit scores and personal credit scores are different, but they can also intertwine. Therefore, it is important to still take care of your personal credit score if you don’t want it to impact your business. Even if you do have a poor rating on either score, you can still get the help you need through specialised bad credit funding.