Business Credit vs Personal Credit

Both business and personal credit provides insight into your ability to manage debt effectively. However, business credit is related to your business’s financial history while consumer credit is based on your personal spending history. Additionally, business credit is linked to your business’s employer identification number (EIN). Meanwhile, personal credit is tied to your Social Security number (SSN).

Both business and personal credit have their own credit score ranges. Business credit scores usually range from 1 to 100, with 100 being the best score possible. Personal credit scores typically range from 350 to 850, with 850 being the best score available. The higher your score, the more likely you are to qualify for favorable terms like lower interest rates and larger loans. You can view both your business and personal credit scores online for free through NAV.

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How Business Credit Works

Your business credit is measured by four credit bureaus and scoring models: Dun & Bradstreet (D&B), Experian, Equifax, and FICO SBSS. These credit bureaus collect public and private financial information to calculate your business credit score, including vendor accounts, payment history, the size of your company, and debt obligations like business credit cards. Although business credit is linked to a unique EIN, anyone with your business information can view your business credit report through the following credit bureaus:

• Dun & Bradstreet (D&B): This is the most widely used business credit bureau. To establish credit with D&B, you’ll need to apply for a Data Universal Numbering System (DUNS) number. This bureau offers five main credit scores that measure a company’s status: PAYDEX® score, D&B rating, Delinquency predictor score, Failure score, and a Viability rating.
• Experian: Experian uses current and historical financial data, as well as public information, to collect and create your credit score. Experian’s business credit score—Intelliscore Plus—ranges from 1 to 100, with 100 being the highest score possible.
• Equifax: This agency evaluates public business and industry information, payment history, and financial performance information to produce two credit scores: the Equifax Business Credit Risk Score™ and Equifax Business Failure Score™.
• FICO SBSS: Although it’s not a credit bureau, the FICO SBSS scoring model uses a combination of personal and business credit to provide a business credit score between 1 to 300. The Small Business Administration (SBA) requires a minimum score of 140, but in most cases, you’ll typically need a FICO SBSS score of 160 or above for SBA loan approval.

Business credit scores typically range from 1 to 100 (up to 300 with FICO SBSS), with 100 being the best score possible. Although D&B is the most commonly used credit bureau and score, it’s a good idea to pull all your business credit reports regularly.

How Personal Credit Works

Your personal credit profile is linked to your Social Security number and is measured by four credit bureaus: Experian, Equifax, Transunion, and FICO. There are also two main credit scoring models—VantageScore and FICO. Scores typically range from 300 to 850, with 850 being the best score possible. Only you and the companies you authorize can pull your credit with these credit bureaus:

• Experian: Experian uses personal financial information to compile consumer credit reports. It provides VantageScores that range between 300 and 850, with 850 being the best.
• Equifax: Equifax uses your personal loans, credit cards, and payment history to create credit profiles. It provides VantageScores ranging from 300 to 850, with 850 being the highest possible score.
• TransUnion: Transunion is the smallest bureau. It collects personal financial information and offers VantageScores from 300 to 850, with 850 being the best score possible.
• FICO: FICO is the oldest and most widely used personal credit scoring system. Scores typically range from 300 to 850 but can range from 250 to 900 depending on the FICO version used. FICO also offers the UltraFICO score, which is an opt-in credit model for people with scores below 680.

Lenders use personal credit to determine your creditworthiness and your ability to pay debt. Because personal credit information often varies depending on the credit bureau, it’s in your best interest to check your credit with each bureau. Thankfully, you can check your credit for free without hurting your score.

How Business Credit Affects Personal Credit

It’s important to understand how business credit affects personal credit to protect both your personal and business credit scores. Creditors will sometimes use your personal information to help verify your business application—particularly when you don’t have enough business history to justify the risk. A healthy personal credit profile can bolster your business credit and improve your chances or approval for business products in the future.

How Business and Personal Credit Is Calculated

Both personal and business credit bureaus evaluate different factors that make up your credit scores, including payment history, types of accounts, and total available credit. However, while both business and personal credit measure your financial health, the main difference between personal credit and business credit is the way they’re calculated.

How Business Credit Is Calculated

Business credit considers several factors, including how long your business has been in operation, vendor accounts, credit lines, open credit card accounts, annual revenue, loans, liens, and public information. However, depending on the credit bureaus and scoring model, each factor may carry different weights.

How Personal Credit Is Calculated

Five main factors, or the 5cs of credit, make up your personal credit score. These factors include payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit accounts (10%). Together, your payment history and credit utilization ratio make up 65% of your personal credit score.

How to Build Business and Personal Credit

It’s ideal to have strong business and personal credit scores. However, imperfect credit is more common than not. If you have bad credit scores, you can build or improve your scores by focusing on factors like your payment history and level of existing debt. If you don’t have credit, you can start building your credit in many ways, including by opening a new credit card.

How to Build Business Credit

Before you start building credit, you should ensure your business information is correct and up to date. It’s also important to make sure all vendor payments are being reported to your business credit report so that it reflects current activity. This will build your payment history and strengthen your business credit profile.

If you don’t have business credit, it’s worth building business credit right away. One of the easiest ways to build business credit is to open a business credit card. When you’re building your business credit, it’s crucial to repay all your debt obligations in a timely fashion. Your payment history is the most important factor that makes up your business credit score.

How to Build Personal Credit

You can start building and improving your personal credit by paying down existing debt, opening a personal credit card, and making timely payments. Your payment history and credit utilization ratio are the two most important factors that make up your personal credit score. As a rule of thumb, you should always keep your total balances below 30% of your total available credit.

Frequently Asked Questions (FAQs)

We covered a lot of information around business and personal credit, and there may be additional questions you have. We address the most commonly asked questions here. If we don’t answer your questions in this section, please leave a comment below.

What is personal credit?

Personal credit is financial information reported and compiled by consumer credit bureaus—Experian, Transunion, and Equifax. These credit bureaus use your personal information, including credit lines, loans, and credit cards, to produce a three-digit credit score that represents your creditworthiness to potential lenders and creditors. Scores typically range from 300 to 850, with 850 being the best score.

Can business credit affect personal credit?

Although business credit and personal credit are mostly separate, they can affect each other. For example, in some cases, lenders and creditors may use your personal credit to qualify you for business credit products. For that reason, it’s crucial always to maintain a strong business and personal credit history.

How do I build up my business credit without using my personal credit?

You can build your business credit without your personal credit by obtaining an EIN. You can then use that number to ensure your business information is attached without your personal information. Using an EIN helps keep business products, like bank accounts, loans, and business credit cards without a personal guarantee, separate from your personal credit.

Bottom Line

Your business credit helps vendors and lenders decide when approval of loans and credit cards are appropriate. However, most lenders and issuers also use consumer credit to determine creditworthiness. Although they aren’t always connected, it’s best to maintain strong business and personal credit because they both represent your overall financial health.