Credit scores evaluate the creditworthiness of an individual or a business. Lenders often consider credit score as a factor to determine the probability of an individual or business paying off a debt.
There are differences between a personal (or consumer) credit score and a business credit score. Take a look at the chart below.
(NOTE: If you are a sole proprietor with no employees, then your business credit is tied to your Social Security Number and therefore your personal credit.)
| Personal Credit Score | Business Credit Score | |
| Identifier | Social Security Number | Employer Identification Number |
| Uses | Determine borrowing power Determine insurance rates Employment | Determine borrowing power Determine rates on business insurance Get more time to pay |
| Main Reporting Bureaus | Experian Equifax Transunion | Dun & Bradstreet Experian Equifax |
| Scoring Range | 300-850 Excellent: 800 to 850 Very Good: 740 to 799 Good: 670 to 739 Fair: 580 to 669 Poor: 300 to 579 | 0-100 Higher scores indicate lower risk 60 and over is considered an acceptable score |
| Factors in Score | Payment history Total amount owed Length of credit history Types of credit New credit | Credit utilization ratio Payment history Length of history Business size Industry risk |
| Legal Protections | Ability to challenge inaccurate entries | — |
According to the Small Business Administration, a personal credit score of at least 650 is needed to qualify for loans.
Vigilant monitoring of your business credit is wise. While fair credit reporting laws allow consumers to challenge inaccurate entries on personal credit reports, similar laws do not exist for business credit reporting.
During COVID-19, we’ve seen a rise in scams such as identity theft that can negatively impact both personal credit scores and business credit scores.
Identity theft protection and credit monitoring services include ones offered by the three major credit bureaus: Experian, Equifax, and Transunion. Many credit card companies also offer some sort of credit monitoring services that alert users to any changes to their credit report.
While these services offer a layer of protection, the best precaution is to review both your personal credit and business credit often and report any inaccuracies immediately.
Ways to safeguard your identity and assets if your information is compromised:
- Change the passwords on your email, bank account, and other accounts
- Have a list of your credit cards, banks, and other financial institutions where you do business. Notify them you were a victim of identity theft.
- Place a credit freeze and a fraud alert with each of the three major credit reporting agencies.
Sources:
Business Credit vs. Personal Credit: Does Business Credit Affect Personal Credit? (Fundera)
Business Credit Scores (Nav)