If you’re a small business owner, you know that running a business can be pricey, and keeping your business and personal finances separated and straight can be a full-time job. It’s an important one though – separating not just your business and personal expenses, but also your business and personal credit can keep you and your business protected and set up for success.

This guide outlines the key differences between personal credit and business credit. More importantly, it explores how both types of credit could impact you. If you’re looking for strategies that can help you build strong credit for your business and yourself, you’re in the right place. 

The Differences Between Personal Credit and Business Credit

When you want to borrow money, your credit history and score typically influence your ability to qualify for an account with a given lender. The condition of your credit can also determine how much you pay for financing, known as your interest rate. 

On the personal side, your consumer credit reports and credit scores usually come into play with any loan or credit card application. But if you’re trying to obtain financing for your small business, commercial lenders may want to review your business credit information in place of or in addition to your personal report. 

Personal Credit Reports 

These reports contain details about credit obligations you have taken on under your individual Social Security number. This credit history starts when you open your first loan or credit card that a lender reports to a consumer credit bureau (usually TransUnion, Experian or Equifax). 

Mortgages, personal loans, and credit cards are all examples of the types of accounts that might appear on your consumer credit reports.

Personal credit scores are a numerical assessment of your credit risk, based on information from your consumer credit reports. Credit report factors such as payment history, the amount of debt you owe, and length of credit history all impact your personal credit score.

Business Credit Reports 

These reports feature information about accounts tied to your Employer Identification Number (EIN). You can begin establishing business credit history by opening an account that reports to one or more of the business credit reporting agencies.

Business loans, credit cards, and lines of credit are all examples of accounts that might help you build business credit. Once these accounts are open and active, your business credit scores is based on how effectively you manage those accounts.

Business credit reports may also contain demographic details, such as how long you’ve been in business, the number of employees at your company, and the industry in which you operate. Public records such as liens, bankruptcies, and judgments (if applicable) may appear on your business credit reports too. 

Credit Bureaus

Consumer Credit Bureaus

There are three major consumer credit bureaus in the United States: 

• Equifax
• TransUnion
• Experian

When you apply for personal financing, lenders will typically reach out to one or more of these credit bureaus to purchase copies of your personal credit reports. 

Data furnishers (i.e., credit card issuers, lenders, collection agencies, etc.) will generally share your account information with some or all of the major credit bureaus once a month, reporting payment activity, account balances, and total available credit, along with potential other details of your account.

It’s easy to access free copies of your personal credit reports. First, you can visit AnnualCreditReport.com once every 12 months to claim a free report from all three credit bureaus. 

There are also numerous websites that offer free consumer credit reports in exchange for the right to advertise various products and services to you. 

Business Credit Bureaus

There are numerous business credit bureaus as well. Five of the most recognizable names in business credit reporting are as follows: 

• Dun & Bradstreet
• Experian
• Equifax
• PayNet
• Small Business Financial Exchange (SBFE)

You’ll note that two of the business credit bureaus listed above—Experian and Equifax—are also members of the “Big 3” consumer credit reporting agencies. However, Experian and Equifax business credit reports are completely separate from your personal credit reports. 

If you’re looking for free business credit reports, your options are more limited. However, resources like CreditStrong and Dun & Bradstreet Credit Signal do offer you the chance to review some of your business credit data free of charge. 

Business credit reports are also available for purchase directly from the business credit bureaus. 

Depending on the product or subscription, the price for these reports can range from $39.95 for a single report to as much as $1,495 per year for commercial credit monitoring and other services. 

Credit Scores and Ranges

Consumer Credit Scores

In the consumer credit world, the two most widely used credit scoring systems are FICO® and VantageScore. The FICO Score has been available from all three major credit bureaus since 1991, and lenders use some version of the FICO Score in around 90% of lending decisions.

VantageScore was founded by Equifax, TransUnion, and Experian in 2006. Across the country, lenders use billions of VantageScore credit scores every year to help assess the risk of consumer credit applicants. 

Both scores range from 300-850. Higher scores signal to lenders that you’re a better credit risk. 

FICO and VantageScore credit scores do use different algorithms to predict credit risk. Yet the factors that affect your personal credit scores are similar under both systems. 

• Payment history is the most important factor in your credit scores. On-time payments are essential if you want to develop and maintain good personal credit scores. 
• Amounts owed, especially your credit card utilization rate, also have a meaningful influence over your credit score. And lower credit card utilization levels are best. 
• Length of credit history also affects your credit score. As the accounts on your credit report grow older, your personal credit score may improve. 
• Credit mix, or the mixture of account types on your consumer credit report, matters, too. The more diverse the accounts on your report, the better. 
• New credit (both credit inquiries and new accounts) might set your credit score back if you make a habit of applying for and opening new accounts too frequently. 

Business Credit Scores

Business credit scores aren’t as similar to one another as consumer scores. There’s a great deal of variation in consistency of reporting across bureaus (many organizations report to some but not all bureaus), not to mention the inclusion or weighting of factors that shape your business credit scores in the first place. 

Equifax

The Equifax Business Delinquency Financial Score ranges from 101 to 650. A “0” credit score indicates that your company has filed for bankruptcy. A “null” score applies if your business has no established credit history. As usual, the higher your score, the better your credit rating.

Equifax Scores Explained

Score Range	Risk Class	Risk Description	Bad Rate
585-650	1	Low	0.57%
554-584	2	Low – Moderate	0.98%
465-553	3	Moderate	3.93%
299-464	4	Moderate-High	21.2%
101-298	5	High	75.3%

With a CreditStrong Business Credit Builder Account, you can review your Equifax Business Delinquency Financial Score grade free of charge every month. 

This access allows you the opportunity to monitor your progress as you work toward establishing a good business credit rating.

Factors that may affect your Business Credit Risk Score include: 

• An Increase in Delinquent Payments
• Negative Public Records
• Credit Inquiries
• Number of Accounts on File
• Outstanding Balances
• Payment History
• Credit Utilization

Dun & Bradstreet 

Your company’s D&B PAYDEX® Score can range from 1-100. A higher score indicates that your business is less likely to pay its bills late or default. 

High Risk	Medium Risk	Low Risk
0-49	50-79	80-100
Payments are made more than 30 days late.	Payments made 15 to 30 days late.	Payments made on time or early.

PAYDEX Scores Explained

PAYDEX Score	Explanation
100	Payment comes 30 days before the due date.
90	Payment comes 20 days before the due date.
80	Payment comes on the due date.
70	Payment comes 15 days after the due date.
60	Payment comes 22 days after the due date.
50	Payment comes 30 days after the due date.
40	Payment comes 60 days after the due date.
30	Payment comes 90 days after the due date.
20	Payment comes 120 days after the due date.
1-19	Payment comes over 120 days after the due date.

As you can see above, paying your business credit obligation early might help you to earn a higher PAYDEX score. 

Experian

The Experian Intelliscore Plus℠ also ranges from 1-100. A high score communicates to lenders that your business is a good credit risk. 

Experian Scores Explained

Score Range	Risk Grade	Risk Description	Bad Rate
76-100	1	Low	1.7%
51-75	2	Low – Medium	4.4%
26-50	3	Medium	10.0%
11-25	4	Medium – High	19.1%
1-10	5	High	50.8%

Factors that influence your Intelliscore Plus score may include: 

• Payment History
• Frequency of Delinquencies (Collections, Derogatory Public Records, Etc.) 
• Credit Utilization 

PayNet

PayNet MasterScores features a range of 500-800. When your business credit score falls on the high side of PayNet’s range, it tells commercial lenders that your business is less likely to default on its debts. 

PayNet Scores Explained

Score Range	Risk Description	Bad Rate
700-800	Low	1.1% or Less
660-699	Low – Medium	Low-Medium
630-659	Medium	4.1% to 9.0%
590-629	Medium-High	9.1% to 21%
500-589	High	Greater than 21%

Factors that might affect your PayNet credit score include: 

• Payment History
• History of Delinquent Payments
• Time in Business
• Number of Years Experience of Borrowing
• Borrower Habits
• Debt Paydown Behaviors
• Amount of Borrowings
• Industry 
• NAICS Code

FICO Small Business Scoring Service Score 

The FICO® SBSS Score is unique because it combines personal and business credit factors to assess your credit risk. The score ranges from 0-300, and one of its most popular uses is for Small Business Administration (SBA) loans. 

If you’re applying for a business loan backed by the SBA, you’ll need a FICO SBSS Score of 155 or higher. However, many lenders impose their own overlays that require borrowers to have a minimum FICO SBSS Score of at least 160. 

Factors that influence your FICO SBSS Score might include business and/or personal: 

• Payment History
• Credit Utilization
• Business Revenue
• Age of Business

Business Credit Is Far Less Regulated Than Personal Credit

Both federal and state laws offer numerous protections when it comes to consumer credit: 

The Fair Credit Reporting Act (FCRA) 

This act is the chief law that ensures your personal credit reports remain both fair and accurate. This same law also gives you the right to access your personal credit reports for free once every 12 months via AnnualCreditReport.com. 

And the FCRA also limits how long most types of negative information are allowed to remain on your consumer credit report. Unfortunately, these rights and protections do not extend to your commercial credit reports. 

The Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) 

This act is another federal law that benefits consumers. The CARD Act limits interest rate hikes, eliminates double-cycle billing, and caps a number of different fees that credit card issuers are allowed to charge their customers. 

However, this law only applies to personal credit cards, and not to business credit card accounts. 

The Fair Debt Collection Practices Act (FDCPA) 

This act also protects consumers at a federal level against unfair debt collection behaviors. 

Thanks to this law, debt collectors may not harass you, threaten to sue you (unless they truly intend to do so), or deceive you in an attempt to collect unpaid debts. But this law does not apply to business debts.

Lenders Look at an Small Business Owner’s Personal Credit If Their Business Credit Isn’t Very Well Established

Business lenders may want to review your personal credit information in addition to your business credit, especially if your company doesn’t have much commercial credit experience. 

And with certain types of business financing, like business credit cards, it’s common for the credit card company to review your personal credit information no matter what. 

As a result, you’ll want to focus on building and maintaining both good personal and business credit to put your company in the best borrowing position possible.

Is Business Credit Linked to Personal Credit? 

As mentioned above, your business credit reports and credit scores are separate from your consumer credit information. Yet there are times when business accounts might find their way into your personal credit reports. 

Personal Guarantees

Even if you only apply for financing in your company’s name, some business lenders may also want you to sign a personal guarantee. Again, this is common in the small business credit card space.

When you sign a personal guarantee you agree to accept responsibility for your company’s debt in the event that it fails to repay as promised. 

If you sign a personal guarantee and your company defaults on the debt, the lender might add the derogatory account to your personal credit reports. 

Small Business Credit Cards

Some small business credit card companies will report accounts to both the consumer and commercial credit reporting agencies. If you open an account with a card issuer with this policy, your business credit card may show up on your personal credit reports. 

Does Personal Credit Affect Business Credit?

Some business credit scoring models, like FICO SBSS, will assess your business and personal credit history together. But otherwise, your personal credit typically doesn’t impact your business credit reports or scores. 

That being said, the condition of your personal credit could affect your ability to qualify for new business loans or credit cards. It all depends on whether a lender wishes to review your personal credit information as part of its application process. 

If a commercial lender does review your personal credit, it could also have an influence over the interest rate, fees, and other borrowing terms. 

How Do You Separate Business Credit from Personal Credit? 

It is possible to build business credit without using your personal credit in the process. Yet you will need to follow a series of specific steps to accomplish this goal. Some of the actions you may need to take to keep your business and personal credit separate include:

Establish Your Business The Right Way

This process begins by forming a separate, legal business identity with your state, like a corporation, LLC, or partnership.

From there, be sure to use your legal business name as you register for a physical address, phone number, website, email address, and more. 

Apply for an EIN 

You should request an Employer Identification Number from the IRS for your company. You’ll need this identification number both for tax purposes and in case you wish to apply for business financing options. 

Open a Business Bank Account

Again, be sure to use your legal business name here. Separating your finances is one of the most critical components of maintaining separation between your business and your personal life.

Establish Credit In Your Company’s Name

When you’re first getting started, vendor accounts and business credit builder accounts may be among your best options for building business credit.

You can consider applying for a small business credit card too—though ideally from a credit card company, that will not report the account to the personal credit bureaus. 

Bottom Line

As a business owner, understanding the differences between personal credit and business credit could empower you to improve them both. 

Bad personal credit or bad business credit has the potential to hold your business back from lucrative opportunities. But good credit can be a tremendous asset for your business—both on the commercial and personal side of the equation.

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