Personal Credit Score vs. Business Credit Score: What’s the Difference?

difference between personal credit score and business credit score

Last Updated on December 22, 2022 by Selina Parker

Personal credit score and business credit score are two essential numbers lenders consider when considering a loan. Both scores tell the lender how creditworthy you or your business is, but there are some critical differences. This blog post will discuss what those differences are and why they matter.

What is personal credit?

It is a score that lenders use to determine your creditworthiness. Your credit score is a number that reflects your track record of borrowing and repaying. Your Social Security Number generates a personal credit score unique to you.

Your score reflects your personal credit history, including your payment history (on time or late), the types of credit you use, how much debt you have, and the length of your credit history.

If you avoid debt and make all your payments on time, you will likely have an excellent personal credit score, also known as the FICO score. But having poor personal credit will affect your chances of getting approved for a business loan.

What is business credit?

Business credit is a score that lenders use to determine the creditworthiness of your business. It records your business’s credit history and past borrowing and repayment behavior.

Business credit is a number that reflects the financial health of your business. This score is based on your creditworthiness at a specific point in time and can range from 0 to 100. The higher your score, the more likely you will get approved for a loan and contact better terms (like a lower interest rate). But most businesses require a score of 75 to 80 or higher to get the best terms from lenders.

You will need an Employee Identification Number or EIN to begin building business credit. This number is obtained from the IRS and is used to identify your business for tax purposes.

Your business credit score will vary based on these factors:

Credit history

Like your personal credit score, business credit scores consider your business’s repayment history and the credit bureaus also review this. It includes whether you have made on-time or late payments and how often you have been delinquent.

Business demographic

The business demographic information includes your business’s industry, size, location, and years in business.

Public records

This category includes legal filings against your business, such as bankruptcies or tax liens.

Credit utilization

This factor looks at how much of your available credit you use in your business credit cards. Your business credit utilization should be under 30% to maintain a good business credit score.

Personal Credit vs. Business Credit: How are they different?

Personal and business credit is almost the same: they both tell the lenders of your creditworthiness. Your business credit reports are your business credit, while a personal credit score is the bases of your Social Security number.

The main difference between business credit and personal credit is their purpose. Business credit scores evaluate firms’ financial soundness, while personal credit scores evaluate individuals’ financial soundness.

But here are other differences between the two:


Personal credit reports will stay with you for life. But your business credit report will only stay with your business for as long as it is active. If you close your business, your business credit file will be closed, too. The credit report will transfer to the new owner if you sell your business.


An inquiry is when a lender checks your credit report to see if you’re a good candidate for a loan or line of credit. When you apply for business credit, multiple searches may appear on your business credit report. But only one inquiry will appear on your credit report. Business credit inquiries are only reported to business credit reporting agencies, while personal credit inquiries report to business and consumer credit reporting agencies.

Loan eligibility

Personal credit scores determine whether you are eligible for a loan. But business credit scores determine if your business is suitable for a business loan.

Your business credit score is not affected by your personal credit history. And your credit score is not impacted by your business credit history. However, if you are the business owner, your assets may be at risk if you default on a business loan.

Loan capacity

Businesses have a higher borrowing capacity than individuals. Companies can use business assets, such as inventory or equipment, as collateral for a loan. Individuals can only use personal assets, such as a home or car, as collateral for a loan.


If you default on a business loan, the lender may be able to seize your business assets. But if you default on a personal loan, the lender can only hold your assets.

Why is it important to separate your credit and your business credit?

You will need an EIN for business tax purposes to be able to establish a credit right away.

For example, a sole proprietorship or single-member LLC with no employees does not need an EIN. In that situation, your personal credit history would reflect your firm’s financial success.

But keeping your credit and business credit separate is essential for a few reasons: it keeps personal and business expenses separate, makes tax time less difficult, helps you build business credit without affecting your credit score, makes applying for a business credit card easier, protects your assets if your business defaults on loan and help you get better loan terms and rates.



Selina Parker

“What began as a life and career coaching services company to aide entrepreneurs through the early-stage challenges and tough transformations of starting a social venture has evolved over the years to include mergers and acquisitions, organizational consulting, and business growth advisory services to mission-driven organizations that strive to improve access to basic physiological, safety, and security needs while increasing their profit margin. Clients include founders and organizations with the purpose of addressing deficiencies in delivering quality healthcare and mental health services, sufficient employment, access to clean water and air, safe shelter, adequate food, and more.”

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