Entrepreneurs often use personal credit in the startup phase of a new business. This is sometimes done out of necessity, as traditional banks and credit unions don’t extend business credit until the company has been established for a while. In this article, we’ll explain how to avoid using your personal credit for business loans or business credit cards, and how to build business credit as your company grows.
What you need to know
- Your personal credit score (FICO) reflects how you manage consumer debt. Scores generally range from 300 to 850.
- Business credit reflects how your company pays vendors and lenders, and it is tracked separately by business bureaus such as Experian, Dun & Bradstreet, and Equifax.
- Business and personal credit are separate, but they can overlap when you personally guarantee business debt or when you are a sole proprietor.
Business credit vs. personal credit: Summary
| Personal credit | Business credit | |
|---|---|---|
| Who it belongs to | An individual | A business entity |
| Main bureaus | Experian, Equifax, TransUnion | Experian Business, Dun & Bradstreet, Equifax Business |
| Typical score range | 300–850 | Depends on bureau |
| Main scoring factors | Payment history, utilization, age of accounts, credit mix, new credit | Payment history, trade lines, business age, utilization, industry risk, company size |
| ID used | Social Security Number (SSN) | Employer Identification Number (EIN) |
| Used for | Personal loans, mortgages, credit cards | Business loans, vendor terms, business credit cards |
| Can it affect the other? | Yes, in some business lending situations | Yes, when tied to personal guarantees or consumer reporting |
What is personal credit?
Personal credit is a term used to describe how you manage personal debt. Sometimes called consumer credit, this includes credit cards, personal loans, lines of credit, auto loans, and mortgages. Your payments on each of these are monitored by personal credit bureaus that feed information to companies, like FICO®, that calculate your personal credit score—a measure of your creditworthiness.
Credit bureaus like Experian, Equifax, and TransUnion then keep track of your personal credit history and publish credit reports that you can access. Lenders use your score (during a soft credit check) and these full reports (during a hard credit check, which can impact your score) to assess risk and decide if you can borrow more money.
The bureaus primarily calculate your personal credit score using five factors:
- Payment history: Tracks whether you pay your bills on time. This is the most important category in personal credit scoring. It counts as 35% of your overall credit score.
- Amounts owed: Tracks your personal credit utilization, which is how much you owe compared to your credit limits. This is worth 30% of your overall credit score.
- Length of credit history: This category keeps track of your credit history, so never close your oldest account. This is worth 15% of your score.
- Credit mix: A healthy mix is having a personal loan, a credit card, an auto loan, and a mortgage. A good mix is an indicator of maturity. This is worth 10% of your credit score.
- New credit: Number of new accounts shows up here. It’s worth 10% of your score. Understanding the categories can help you monitor and improve your personal credit. This is important when you go to buy a car or apply for a home loan. Individuals with good credit get better terms and lower interest rates. Using your personal credit for your business could put that at risk. We’ll explain more about that later.
What is business credit?
Your company can have a business credit score and credit reports unrelated to your personal credit score. Business credit reports are produced by Dun & Bradstreet, Equifax Business, or Experian Business, and the variables used to calculate your business credit scores are different from those used to calculate your personal score. They include:
- Your business’s payment history
- Age of business credit history
- Business debt usage
- Industry risk
- Company size
Registered businesses and corporations also have employer identification numbers (EIN), which are attached to your credit in place of your social security number. You’ll also want to register with Dun & Bradstreet to receive a DUNS number. They won’t start tracking your business credit activity if you’re not in their system.
Once you have your EIN and your DUNS, you can apply for some type of business debt. That could be a business credit card or business loan. The three business credit bureaus will track your payments to build your business credit history. The length of that history and the timeliness of your payments on debt accounts will be used to calculate your business credit score.
Is business credit different from personal credit?
Unlike personal credit scores done by FICO—which use a scale of 300 to 850—Dun & Bradstreet scores business credit on a scale of 0 to 100. They both track credit activity, but D&B also tracks business trade lines, or credit issued to businesses from their vendors. That’s one of several credit report differences you’ll see from business credit bureaus.
Business debt management may also be done differently than personal debt management because businesses have a variable income stream. Individuals often rely on a fixed salary, so they can budget debt payments easily. Business owners must be more cautious when taking on debt because market conditions and economic downturns could affect revenue.
Comparing scoring models: business credit score vs personal credit score
| Factor | Personal credit | Business credit |
|---|---|---|
| Score range | Commonly 300 to 850 | Models vary by bureau |
| Main bureaus | Experian, Equifax, TransUnion | Experian Business, Dun & Bradstreet, Equifax Business |
| Main factors | Payment history, amounts owed, length of history, credit mix, new credit | Payment history, trade lines, public records, utilization, business age, industry risk, and company size |
| How scores are built | Based on your consumer credit reports | Based on business payment and trade data, and sometimes owner data too |
| Time to build | Can move over months as lenders report new activity | Usually takes longer because the business needs its own reporting history and trade lines |
- Experian Business uses commercial data and more than 140 variables in its business scoring models. Experian’s business-credit materials also say business and personal credit are distinct, though sole proprietors often see more overlap because lenders view them closely together.
- Dun & Bradstreet uses several business scores, including PAYDEX. PAYDEX runs from 1 to 100 and is built around trade payment performance. D&B also uses other scores and ratings that incorporate payment trends, public records, financial statements, and firm size.
- Equifax Commercial uses commercial scoring products that combine business financial data, public records, firmographic data, and, in newer models, owner credit history. Equifax does not present a single universal public range on the commercial product page I checked, so the model is better understood by what it prioritizes than by one fixed score scale.
How does business credit affect your personal credit?
Can business credit affect personal credit?
Yes, it can. Business debt such as business term loans and lines of credit or bank loans can affect your personal credit when you personally guarantee the obligation, when you are a sole proprietor, or when the creditor reports account activity to consumer bureaus. Business credit cards can also show up on your personal report if the issuer reports them there, and missed payments can hurt you personally.
That is why an LLC does not automatically protect your personal credit. The legal separation helps, but personal guarantees and commingled finances can still create personal exposure. If the lender requires your signature as a guarantor, you are still on the hook if the business does not pay.
Can personal credit affect business credit?
Yes. Personal credit often matters at the application stage, especially for newer businesses, because lenders want another way to judge repayment risk. A Bluevine Line of Credit currently requires a 625+ personal FICO score, 12+ months in business, and $10,000 in monthly revenue, which shows how much personal credit can still matter in business lending.
Over time, strong business credit can become more independent from your personal profile, but that usually happens after your company has enough trade history, reporting vendors, and lender activity of its own. Experian’s business-credit guidance makes the point directly, while also noting that sole proprietors remain closely linked to personal credit in the eyes of lenders.
Why does it matter to keep business and personal credit separate?
Keeping business and personal credit separate protects your personal assets and makes your company easier to run. It gives your accountant a cleaner trail, makes audits easier to handle, and helps you avoid accidentally treating company debt like personal debt. The SBA recommends opening and using a separate business bank account once your company starts taking in or spending money.
It also gives your business a better chance to stand on its own. A company with its own credit file can build vendor relationships, qualify for financing on business terms, and create a credit history that lenders can evaluate without relying only on your personal score.
Why is business credit important?
Building business credit can protect your personal assets from business liabilities—including legal liability. A corporation or LLC is responsible for its own debts, and will not affect the owner’s credit rating if they were taken out under the corporate EIN.
Don’t underestimate the impact of your credit rating on your business. The business credit bureaus track credit utilization that can be used for credit risk assessment. Simple actions like paying your business credit card bills on time could lead to better financing opportunities in the future. Lenders, creditors, suppliers, vendors, and potential partners or investors will look at the factors that make up your business credit, so a good business credit score could be the key to future growth.
Finally, your business credit is important to building credibility and financial independence. Put the same effort into improving it as you do your personal credit, and you’ll eventually have a business that stands on its own.
Common mistakes to avoid with business and personal credit
There are plenty of things you shouldn’t do when it comes to managing your personal and business credit. Here are three of the most common mistakes you should try to avoid.
- Using personal credit for business expenses. Mixing personal and business is not a good strategy—whether it’s expenses, credit, or finances in general. This makes your business less credible, leaves your personal credit unprotected, and puts your personal assets at risk.
- Neglecting to monitor business credit reports. Separating your business and personal credit is the first step. Then, you need to actually keep track of your business credit report to make sure your vendor and credit payment history is being reported, and that no errors are hurting your score. If you see something inaccurate on your report, get in touch with the business credit bureau immediately.
- Applying for too many credit cards or loans. As you know, some business loan or credit card applications come with a soft credit pull, which doesn’t hurt your score. However, applications that involve a hard credit pull—which temporarily dings your score—can add up if you apply for several business credit cards, loans, or lines of credit in a short period of time. For this reason, it’s best to do your research and choose the financing option that suits your business best, and only submit that application. If you’re not approved, you may want to wait a bit before applying to another lender.
How Bluevine handles business credit reporting
Bluevine reports to Experian, which means consistent on-time repayment on your line of credit can help build business credit. To check your business credit, pull reports directly from the major business bureaus and review payment history, trade lines, public records, and inquiries.
Add flexibility to your cash flow with a business line of credit.
FAQs: Business credit reporting
Yes. Business credit belongs to your company, while personal credit belongs to you. They are scored differently, reported by different bureaus, and used for different kinds of borrowing decisions.
Usually not by itself, but it can if you personally guarantee the debt or if the issuer reports the account to consumer bureaus. Business credit cards are a common example.
Yes. Personal credit often matters when a lender underwrites a business loan, especially for a newer company. A Bluevine Line of Credit currently requires a 625+ personal FICO score.
Yes, if the card issuer reports activity to the consumer bureaus or if you fail to pay and are personally liable. Some business cards stay off your personal report, but many do not.
They can. If you sign a personal guarantee, miss payments, or the lender reports to consumer bureaus, your personal credit can be affected. CFPB notes that personal guarantees are common in business credit transactions.
Personal credit usually uses a 300 to 850 scale. Business credit often uses bureau-specific commercial models, such as D&B’s 1 to 100 PAYDEX score, or other models that weigh business payment history, public records, and company data.
Bluevine reports its line of credit repayment history to Experian. Bluevine customers should also monitor business credit reports from Experian, Dun & Bradstreet, and Equifax.
Yes, an LLC can build its own business credit file if it has the right structure, tax ID, reporting trade lines, and payment history. The separation is stronger when you avoid personal guarantees and keep business and personal finances apart.
Usually months, not days. You need a legal business entity, an EIN, vendor or lender reporting, and a record of on-time payments before your file becomes meaningful to lenders.
