Business Credit: Ins and Outs
Similar to how you can build personal credit, businesses also have a business credit score that can help determine how easily they get approved for a number of things such as loans, credit cards and more. There are a lot of different ways that you can build the credit for your business, however it can be a long process. Here is some information about the similarities and differences between business and personal credit.
The first difference is the range of the scores. Personal scores range from 300 to 850, where business scores range from zero to 100. However, the way that the scores are affected is still similar: having lines of credit and making payments on time can still increase your score.
Another difference is that the algorithms used to calculate a score are different. Although they generally measure many of the same things, a personal credit bureau uses FICO’s algorithm and business credit bureaus use a different algorithm. Furthermore, the algorithm varies from bureau to bureau when it comes to calculating credit scores for businesses.
The data being calculated is different depending on whether you are talking about business or personal credit. However, if you have a relatively new business that hasn’t had time to establish a credit score, your personal credit may be taken into account when lenders are deciding whether to extend a loan or credit card to your business. This is because how you handle your personal finances may help determine if you are able to handle business finances, as well.
Even the way that you access your credit score varies between business and personal. Where there are a lot of places to check your personal credit score for free online, you generally have to pay for your score when it comes to your business. However, it is recommended to make this purchase at least once a year in order to track where you are at and decide how to improve it if there are problems.
The final difference of importance is the privacy. Where personal credit is not generally viewable by the entire public, the credit for your business and every other business out there is available to anyone willing to pay for the information.
Now that you know of some of the differences between personal and business credit, you can begin making a difference in your credit score for your business. Start looking into ways that it can improve and ways for your to track your credit so that you can get better credit and better opportunities.