You probably already know that when you want to borrow money, your credit is one of the first keys to qualifying. The better the condition of your credit, the more likely you are to receive favorable rates and terms as well.
Of course, as a business owner you don’t have just your personal credit reports to manage. You need to pay attention to your business credit reports as well.
Understanding the differences and the similarities between your personal and business credit reports can be tremendously helpful. After all, maintaining clean credit and earning high credit scores is in your best interest, both on a personal level and to help promote the health of your business.
Different Credit Reporting Agencies
Credit reports are generated and sold by credit reporting agencies (also known as credit bureaus). However, your personal credit reports and your business credit reports are not created by the exact same companies.
On the personal side, your credit reports are maintained and sold by the following:
Commercial credit reports are maintained and sold by:
- Dun & Bradstreet
You’ll notice that both Equifax and Experian create personal and business credit reports. Yet the reports these two companies generate for consumers and businesses are separate. They are also based upon separate credit files and different sources of information.
There’s quite a bit of overlap between the type of data listed on a business credit report and the data which appears on your personal credit report. Nonetheless, the information featured on commercial credit reports and personal credit reports isn’t completely the same.
Here’s a look at the types of information which might appear on your personal credit report versus a business credit report.
- Personal Credit Report
- Identifying Information (e.g. name, addresses, social security number, date of birth, etc.)
- Current and Closed Accounts (e.g. mortgages, credit cards, auto loans, personal loans, student loans, etc. plus the payment history and balances of those accounts)
- Collection Accounts
- Public Records (e.g. bankruptcies — formerly judgments and tax liens as well)
- Credit Inquiries
- Credit Score*
*A credit score isn’t technically part of a personal credit report. Rather, it’s a separate, add-on product often sold alongside a personal credit report.
- Business Credit Report
- Business Background Information (e.g. owners, parent companies, subsidiaries, etc.)
- Business Financial Information (e.g. bank account balances, returned checks, assets, real estate owned, inventory, sales, etc.)
- Banking, Trade, and Collection History (e.g. accounts opened in the business’ name and the payment history on those accounts)
- Liens, Judgments, and Bankruptcies
- Uniform Commercial Code Filings
- Credit Score*
*A business credit score might also be sold as a separate, add-on product.
Different Scoring Models
Credit scoring models are designed to help lenders predict the risk of extending credit to you. Many credit scores predict the likelihood that you will make late payments in the future.
There’s no such thing as having “one” credit score. Rather, hundreds of credit scoring models are available for purchase. Ultimately, it’s up to each lender to decide which brand, type, and version it prefers best.
Here’s a look at the most popular brands of credit scores used by lenders for both personal credit and business credit risk evaluation.
|Personal Credit Score||Score Range|
|FICO (by Fair Isaac Corporation)||300 – 850|
|VantageScore (jointly introduced by Equifax, TransUnion, and Experian)||300 – 850|
VantageScore reports that its scores are steadily gaining popularity among lenders. However, the much older FICO reports that 90% of top lenders use FICO Scores when making (personal) lending decisions.
|Business Credit Score||Score Range|
|PAYDEX Score (by Dun & Bradstreet)||0 – 100|
|Intelliscore PlusSM (by Experian)||0 – 100|
|FICO LiquidCredit Small Business Scoring Service or FICO SBSS (by Fair Isaac Corporation)||0 – 300|
|Equifax Business Credit Scores (10 or more options)||Range varies depending upon the score type used.|
Some business credit scores are based upon only the information on one of your business credit reports. However, some scoring models determine your business credit score based upon your business and personal credit reports combined.
Both Types of Reports Matter
Ignoring the importance of your credit can be a costly mistake, both as a business owner and a consumer. Want to keep more of your hard-earned money in your bank account? The condition of your credit reports matters.
If you want a chance to improve your personal or business credit scores here are three smart tips which may help.
- Monitor both your personal and business credit reports and scores frequently. (Nav gives you the option to monitor your business and personal credit in one spot.
- Dispute incorrect information on your credit reports.
- Avoid late payments. (Your payment history is the most important factor considered by most credit scoring models.)
Remember, your credit scores are calculated by a complex algorithm. You have no control over which type of credit score a lender uses nor do you have any direct ability to change your credit scores.
However, you do have a lot of control over the information upon which your credit scores are based — your credit reports. Both your personal credit scores and your business’ credit scores are calculated after examining the information on your credit reports.
So really, improving your credit scores is easy. Just focus on developing smart credit management habits. The rest should fall into place from there.
This article was originally written on January 16, 2019 and updated on December 22, 2021.