Where Is the Line Between Personal and Business Credit Scores?
There are two types of credit scores that can affect you, and each has its own uses and purposes. These are your personal and business scores. So what is the difference between these two different numbers, what do you need to know about each, and what steps should you take to make sure you have healthy credit?
Your Personal Credit
Everyone has a credit score, unless they have never taken advantage of any kind of credit or made certain kinds of purchases. Simply using a credit card builds your personal credit. In addition to this, all sorts of things can further affect the health of your credit, such as paying bills, taking out loans, or making real estate transactions. Your personal credit affects your ability to take out loans and be trusted with credit.
Your Business Credit
Figuring out the credit score for your business is a little more complicated. You need to take an active role in determining your business’ credit. The first step you should take is to acquire a D-U-N-S number. This is especially important for new businesses. Remember that there are three main bureaus that manage business credit. These are: Dun & Bradstreet, Equifax, and Experian.
So what is the difference between business credit and personal credit in practice? You may be surprised to hear that very little is different. They function in essentially the exact same way. That is to say that both personal credit and business credit affects how able you are to take out a loan or receive credit. As you would expect, your personal credit may make it possible for you to take out a personal loan, while your business credit may make it possible to take out a business loan. Additionally, your credit also affects what kinds of loans you can take. Some types of financing are more appealing and beneficial than others. With a better score, credit companies are more willing to offer you riskier loans. Think of your score as how well you have proven your ability to manage credit and avoid long term debt.
Just like how your business score allows you to take out business loans and personal score allows you to take out personal loan, the aspects that affect your scores are separated in the same way. Making personal transactions and paying personal bills builds your personal score, while paying business bills and managing business credit affects your business score. The key is understanding what your needs are, so you can manage the appropriate credit score.