How's your business credit different than personal credit?

Personal vs. Business Credit

You probably know your personal credit score. You might even check it regularly with a free service like CreditWise® from Capital One®. Business credit reporting isn't as standardized or widely understood as personal reports and scores. So it's useful to understand the differences between a personal score and a business credit report. We'll also look at the different data points bureaus use to create reports and scores.

PERSONAL CREDITVERSUSBUSINESS CREDIT

Deep dive into the nuances to
make business credit work harder for you.

Personal Credit

Business Credit

Credit Scores

Personal credit gets a comprehensive score from a scoring agency (FICO® is one of the most recognized).

There's less consistency or standards for business scores.

Credit Scores Ranges

Most personal credit scores range from 300-850.

Business credit has many different scores due to varying scoring methodologies.

Protections

The Fair Credit Reporting Act (FCRA) privacy law provides many protections for consumers.

While protections exist for consumers, similar legislation for business credit has yet to fully materialize.

Public Availability of Information

Federal laws prevent your personal credit report from being accessed without your consent.

Businesses often don't have the same transparency and control over who can access and use their credit information.

Loan Approvals

Personal credit is used solely by lenders to make approval decisions about small loans.

Lenders also look at business credit when making large loans.

FICO is a registered trademark of Fair Isaac Corporation.

While there are similarities between personal and business credit, the major differences are:

  • Credit Scores: Your personal credit report comes in the form of a comprehensive score likely based on a model from FICO®, one of the most recognized consumer scoring agencies. While consumer scores may still vary, there's even less consistency or standards for business scores. Instead, credit rating agencies use a variety of methods and factors to evaluate your company and create its business credit score.
  • Credit score ranges: Most personal credit scores range from 300 to 850, with a score of 750 or more considered excellent. On the other hand, business credit has many different scores due to varying scoring models with some vendors weighting risk or payment history as more important.
  • Regulation: For consumers, a privacy law known as the Fair Credit Reporting Act (FCRA) provides many protections. The law established strict standards for who uses or contributes to your personal credit information. While these protections exist for consumers, similar legislation for business credit has yet to fully materialize.
  • Public availability of information: Federal laws prevent your personal credit report from being accessed without your consent. On the other hand, anyone can access your business credit report without permission simply by visiting a credit bureau website and paying a fee.
  • Loan approvals: While personal credit may be used solely by lenders to make approval decisions about small loans, they may also look at business credit when making large loans. Think of it this way: A bank might lend you $10,000 based on good personal credit but would likely take the extra step of looking at your business credit if you ask to borrow $100,000.
  • You can find out where your business stands, today, for free with Business CreditWise.

    Get started with business credit.

    Build and maintain your business credit

    If your business has been up and running for a bit, you probably have a business credit report already. If you've done business with a vendor who reports your on-time payments or taken a business loan, your business credit report might be out there waiting for you to access it with a free tool like Business CreditWiseSMfrom Capital One®. If you're just getting started, haven't opened a tradeline or have partners and vendors who haven't reported on your relationship, you may have to take a few steps to get your credit report up and running.

    Here are some steps to get started with business credit:

  • Establish your entity: Every business is different and you'll need to decide on a structure that works for yours before you move forward. Sole proprietor, partnership, corporation and limited liability corporation (LLC) are all structures that might be appropriate.
  • Get a tax ID or EIN: Next you'll need to get a tax ID or Employer Identification Number with the IRS. These applications can be submitted online at the IRS site.
  • Request supplier or lender report activity: Reach out to your partners, vendors and lenders and ask them to report your repayment and credit details. This will establish your payment history, a lot like getting a credit card to get your personal credit report started.
  • Access and monitor your report with Business CreditWise: Make sure everything on your report is correct and up to date and that all those creditors and partners are reporting your activity in a curated and easy dashboard—likeBusiness CreditWise.
  • Build and maintain your business credit.

    Once you're sure your report's been established, you're ready to build, monitor and maintain it. You can build your good business credit by paying bills on time, keeping your relationships up to date and making sure partners are happy with your financial relationships. Monitoring is as easy as using a totally free tool like Business CreditWise. You'll never have to break out a credit card for access and your report is always yours. Let's look at some key elements you'll see on your business credit report:

    Important elementsof your business credit report

    BUSINESS DETAILS

    Number of employees

    Annual sales

    PAYMENTS

    Accounts paid on time

    Accounts due

    Charge offs

    CREDIT USAGE

    Percent utilization

    Highest credit line

    Recently opened accounts

    PUBLIC RECORDS

    Bankruptcies

    Judgments

    Liens

    With Business CreditWise, you'll always be able to take a key step in maintaining your business credit report—monitoring it regularly—for free. You'll also get all the corrections for free.

    Here are some steps to keep your business credit report in good standing that could help make your business more creditworthy in the long-term:

  • Monitor your report: Use a free tool like Business CreditWise
  • Pay often and early: Paying your partners, lenders and vendors on time, and over time, is a great way to show potential lenders, banks and partners that you're a low credit risk and that your business has maintained healthy partnerships.
  • Encourage your partners to update regularly: Ask your partners and vendors to share your relationships with the reporting bureaus. Unlike personal credit, this process isn't a given and you may have to specifically request a vendor to update your payments.
  • Update and dispute incorrect information: If you find something on your report that looks incorrect, make sure you update it as soon as possible.
  • Keep tradelines open: Like your personal credit, how long your credit relationships have been open can have an effect on how banks and partners evaluate your business. Having longstanding lines of credit in good standing shows that you are responsible with credit and may make your business seem like less of a credit risk.
  • Get and use business lines of credit: Using a revolving line of credit, like a business credit card, is another way to show lenders and banks that your business can manage financial relationships.
  • Your business credit report is a reflection of your business. With some careful attention and monitoring, it can speak to the good reputation you've built up and be a valuable tool over the lifetime of your business—it might even have a positive effect on your bottom line as your business grows.