Although commercial and personal credit is independent concepts, they can overlap. What you should know about each, as well as how to keep your company and personal credit scores in good standing, are covered in full below.
Personal vs. Commercial Credit
When you apply for business financing, you begin the process of establishing your company’s credit history and credit score. This score is affected by the length of your credit history, how you use credit, your payment history, and other criteria evaluated by several credit reporting agencies. This is similar to how your own credit score is calculated.
Unlike personal credit ratings, company credit scores are available to the public and range from 0-100. Personal credit scores typically vary from 300 for very poor credit to 850 for excellent credit, with these ratings viewable exclusively to creditors, landlords, and employers, among others.
When Do Business and Personal Credit Converge?
While some business credit card activities will harm both your personal and corporate credit ratings, others will simply affect your company’s credit score. This is primarily decided by the credit card company’s credit bureau reporting policy.
Transactions done with your corporate credit card may be included in your total credit utilization ratio if your business card issuer reports all company credit activity to credit agencies on behalf of both businesses and consumers. If you have a large amount of debt on your corporate card, it might have a detrimental influence on your personal credit score.
This activity has the potential to improve your personal credit score if your business card issuer reports to personal credit bureaus. You must, however, guarantee that it is used correctly and that no payments are missed or late.
Maintaining a Close Eye on Your Credit
You’re undoubtedly already aware of how important it is to keep track of your personal credit score on a regular basis. If your firm has a corporate credit card, you should keep an eye on its credit score. The more information you have about your credit history from corporate and consumer credit reporting bureaus, the better prepared you’ll be to manage or repair your credit.
How to Boost Your Credit Score
When it comes to personal and business credit cards, be cautious.
The greatest method to build credit is to utilize it wisely, whether you have a company or personal credit card. Delinquent credit card payments can harm both credit ratings.
Maintaining a high debt on your company credit card, for example, might have a bad impact on your personal credit, so make it a priority to pay off both cards on time. Consider your purchase carefully before using any credit card for a significant transaction, and use them only when absolutely required.
Keep your personal and business credit separate if you have bad personal credit.
It’s a bad idea to let your personal credit score affect your business. You may have problems securing company financing if you have a low personal credit score. Secured credit cards for businesses may be an alternative. It is preferable, though, to work on improving your credit score in order to qualify for and acquire the funding your company requires.
With time and effort, you can improve your credit score and obtain finance for personal or business expenses during difficult times. Whether you have no credit, bad credit, or fair credit, being responsible with your credit cards and bills will help you create good credit.