Can Your Personal Credit Score Affect Your Business?

Business owners understand just how tenuous their business’ existence can be in a world that is highly competitive and dynamic. Safeguarding business interests is paramount: both in terms of finances and reputation. It can be all too easy for one wrong move to completely derail your business plan and threaten your bottom line.

Where finances and reputation meet, the danger is even more pronounced. Something that causes lenders to scoff and customers to wonder can be a death knell for your business’ success. One example of potential risk relates to available credit.

Even if your business is in tip-top shape, can your personal credit score affect your business? We’ll discuss the potential worries and concerns surrounding this so that you’re in-the-know on this important issue.

Your Business Loans Can Be Impacted

The simplest answer to the question this topic addresses is “yes”: your personal credit score can potentially affect your business in a number of ways. One way in which it can be affected is when borrowing money for your business.

A variety of financial institutions and lenders do, in fact, inspect personal credit scores when factoring in whether to provide a business with a loan. Even if a business is in great condition, a low credit score can potentially signal risk and financial burden for the individual, which in turn could impact the business’ operation. As such, the larger and more formal institutions that lend money often will turn down a business for a new loan if one or more individuals associated with the company have low credit scores.

It’s worth noting that not all lending institutions scrutinize personal credit scores when evaluating lending to businesses. If you’re operating a business with sustained and consistent cash flow, for instance, then you may be able to leverage that revenue for a loan from the institution where you deposit funds. This is because they will look at your business’ recent history of revenue to determine in large part whether to provide the loan.

Additionally, businesses that rely on investments from individuals – whether they be anonymous donors or venture capitalists – may not have to be concerned with personal credit scores. As long as your business plan is functional and/or you’re already doing a steady amount of business, many loans will be successfully earned.

What Is My Current Credit Score?

It might surprise you, but most people do not know their current credit score. There are many different ways to find out what your credit score is in the eyes of lenders, with a variety of free and premium services designed to keep you updated on the situation.

There are three major credit bureaus that calculate the credit scores used by businesses and individuals alike. Experian, TransUnion and Equifax each have slightly different variations for calculating individuals’ credit scores and can display radically different results in some cases. Needless to say, most lenders evaluate all three major credit ratings before making any decision about loaning a business money, so it’s important to have your ducks in a row with all three bureaus.

You can figure out how your FICO score is currently being calculated by visiting

How to Improve Your Personal Credit Score

Because of the potential limiting factors that having a low credit score can cause for your business, it is vital that you consider improving your credit score if it is less than stellar. How can you do that in a responsible way over a period of time?

The first thing that you should do is make sure that there has been no illegitimate activity associated with your identity. Many people who do not check their credit regularly will suddenly discover that somebody has been using their identity to open lines of credit and take out loans. This can leave your credit in ruins, so it is vital to dispute any of these relevant charges and to always keep an eye on your credit score.

If the factors causing a poor credit score genuinely are related to your actions, then you’ll need to begin slowly. Chances are you already have a personal bank account (if not, you absolutely need to open one).

Your next course of action will be to obtain at least one secured credit card if your current access to credit is non-existent. Secured credit cards utilize the amount of money in your bank account(s) as collateral, rather than relying on the good faith of the bank or financial institution.

Once you have spent a meaningful amount of time – say, six months to a year – using your secured credit card and bank account wisely, you can then approach the bank about obtaining a small installment loan. It doesn’t need to be much – anywhere from a few hundred to a thousand dollars is plenty – in order to help rebuild your credit. As you continue to make payments on this loan, you’ll be rebuilding your credit in the same way that the secured credit card will help rebuild.

If you know somebody who is willing to put their name alongside yours, then you can also request that they add you as an authorized user on one or more of their credit cards. This will ensure that their credit reports related to those cards also show up on your credit report, even if you’re not actually using their credit lines.

Last but not least, be sure to always pay any existing debts on time. Whether this is your utility bill or student loans, it is essential that you make your required payments in a timely fashion. Any additional amounts sent to the collection can reverse the progress you’re otherwise making to rebuild your credit.

It is absolutely true that your personal credit score can impact your business and its success. If you want to ensure you have ample access to credit and loans when it comes to business expenses, then be sure to keep your personal finances intact. While rebuilding your credit score takes time, effort and money, it is inevitably worth it for any business owner who plans to be around for the long-term.

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