What is the Difference Between Personal and Business Credit?

Credit is a powerful financial asset. For individuals, it provides access to high-value items like vehicles, homes, and short-term needs or emergencies. For businesses, credit is a key to securing funding, managing cash flow, acquiring business locations, adapting to industry changes, and even winning government contracts.

When a business needs to borrow money, you probably already know that your credit (both score and report) is one of the first keys to qualifying. As your credit score rises, so do your chances of qualifying for a loan and more favorable terms and interest rates. Whether personal or business, strong credit helps build financial security and long-term success.

But which credit report do lenders use for business loans?

It depends. Many lenders, especially when evaluating sole proprietors or newer businesses, will review the business owner’s personal credit. This is because new businesses often don’t have an established credit history, and in sole proprietorships, there is no legal distinction between the owner and the business. Additionally, how someone manages personal debt often reflects how they will handle business finances.

Key Differences Between Personal and Business Credit

1. Different Credit Reporting Agencies (CRA)

   • Consumer (personal) credit agencies: Equifax®, TransUnion®, Experian™
   • Business credit agencies: Dun & Bradstreet®, Equifax®, Experian™
   • Other business bureaus: Creditsafe, LexisNexis®

Business credit reporting agencies collect and report on the creditworthiness of businesses, providing information to lenders, suppliers, and other businesses.

Business credit reports usually cost money, whereas individuals can often access one free personal report per year.

2. Different Scoring Models and Ranges

Credit scores are derived from credit reports using different models, depending on the purpose (home loans, car loans, or business financing). Score ranges also vary:

• Personal Credit Scores: 300–850
• Business Credit Scores: Typically 0–100

Because each credit bureau may use different models, data, and timing for updates, scores can vary. In some cases, individuals or businesses might have multiple scores.

3. Different Types of Credit Reports

There are 3 types of credit reports. They sound similar but are quite different.

• Consumer Disclosure (sometimes referred to as Personal or Consumer Credit)
  • Detailed version of your personal credit report.
  • Accessible only to the individual (the consumer).
  • Includes personal information, account details, payment history, inquiries, disputes, public records, etc.
  • It’s what you get when you request your credit report from a bureau.

• Business Division Report (often referred to as a “credit report” by lenders)
  • A condensed version of consumer reports with core credit information that lenders and other entities like landlords may see.
  • Excludes some details like promotional inquiries (when companies check your credit to offer you something), account review inquiries, or personal inquiries (when you check your own credit).

• Commercial Credit Report (aka Business Credit Report)
  • Contain information about businesses and their activities.
  • Used by lenders, suppliers, and credit grantors to evaluate the creditworthiness of businesses.
  • Includes business registration details, payment history and collections, public records, number of accounts, etc.

Reporting Basics: Who Reports Credit?

• Lenders and creditors are not required to report your credit activity. If they do, they also decide which CRA to report to.
• They must be approved by the CRA and are expected to send regular updates.
• The Fair Credit Reporting Act (FCRA) regulates only consumer credit reporting. It does not apply to business credit reports.

Why It’s Important to Keep Business and Personal Credit Separate

Keeping personal and business finances separate, including credit, is critical. Mixing the two can jeopardize personal liability protection, even if your business is registered as an LLC or corporation.

Always use credit under the appropriate name (personal or business) and keep spending aligned accordingly. Business owners should also work to build business credit independently, ensuring activity is reported to the proper bureaus.

Want Help Understanding or Building Your Credit?

If you want to strengthen your credit or learn how to build a strong personal and business credit profile, Business Impact NW is here to help. Register for a free consultation with one of our Certified Credit Counselors through our Capital Readiness Program.