Business and Personal Credit in 2023: What’s the difference?

Keeping business and personal credit separate can be challenging for small businesses, especially when you own the company. Even if you are the only employee at your company, experts advise making a solid division between your personal and professional finances. This includes developing company credit in addition to personal credit.


No matter how hard you try to keep them apart, your business and personal credit may still be connected. For instance, if you’re looking for financing and need more company experience to be accepted, you could also need to provide a personal guarantee. So here are a few additional critical distinctions between personal and business credit.


What’s the difference between business and personal credit?


Your Social Security Number serves as a link to your credit. Your Employer Identification Number (EIN) or Tax ID Number, which is how the government recognizes your business for tax purposes, connects your business credit history to you. An EIN can be requested online, and you will have it nearly immediately. Officially, sole proprietors don’t require an EIN for taxes, but they do for establishing company credit.


The three main credit agencies, Equifax, Experian, and Transunion, each hold a profile of your personal credit history. Moreover, Experian and Equifax offer services for commercial credit reporting. Your personal credit history is distinct from your company profile.

Some credit reporting companies only work with businesses; the biggest and most well-known is Dun & Bradstreet. As long as each business has its own EIN, you may file a separate report if you have more than one.


Personal vs. business credit scores


Creditors usually use a single number to summarize your credit to assess your situation quickly. The most popular method for determining personal credit scores is FICO. For businesses, there is no counterpart; each commercial credit bureau assesses and reports in its manner.

Lesser legal safeguards for corporate credit are a drawback. There are laws governing consumer credit that allow you to dispute anything on your report and have inaccurate information erased, but there are none for commercial credit. As a result, resolving any difficulties with your company credit record might be significantly more complex. Small business owners can dispute errors with the listing agency, but the listing agent is not obligated to respond.


Why do I need business credit?


If your company doesn’t have access to credit, you may only sometimes be able to conduct business transactions. When deciding whether or not to lend money to a firm, lenders will consider the organization’s credit history. Having credit is also a requirement for business insurance. You can purchase products and services for your company with access to credit.

Why are you unable to utilize your credit for everything? You can in some circumstances, but you shouldn’t. First, combining personal and company costs is strictly prohibited by the IRS. Your bookkeeping is incredibly complicated if you use personal checks or a personal credit card for business expenses. Third, most people think paying for business expenses using specifically designated business dollars makes your company appear much more professional.

Most crucially, if your firm uses personal credit to operate, you put yourself and your family at risk if it encounters bankruptcy or other financial difficulties. Then you will be pursued by creditors since you will be responsible for the costs incurred by the company personally.



When personal and business credit mix


Personal and business credit can sometimes interact, mainly if you operate as a lone entrepreneur. Your credit will typically have a much more significant impact on your business than the other way around.

Your Social Security Number may be needed when applying for some business credit cards. Before renting a space, a landlord could want to perform a personal credit check on you. A personal guarantee may be required for a small business loan. In some cases, the Fair Credit Reporting Act permits lenders to examine a sole proprietor’s personal credit history while making a business loan.



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We are aware of the various opportunities a high personal credit score can provide you. Credit for businesses functions similarly. Do you require financing for a new house or a loan to purchase a foreign vehicle? Whatever the cause, your ability to obtain credit depends on a number of important factors that can either help you or hinder you.


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