The personal credit score is only for people who are individuals, while a business credit score is for companies. Let’s examine the differences between a credit score for a person and a commercial credit score.
Personal Credit Score vs. Business Credit Score
A credit score is personal to a person and measures an individual’s ability to repay a loan. The business score is for businesses and evaluates the power of a company to pay back its debt. If the company isn’t significant, it is possible that the lender would consider looking at the individual credit score as well.
Personal Credit Score
A credit score for a person is a number that ranges from 300 to 900. It is a 3-digit number that lenders examine to judge the credibility of the person applying. Scores of 750 or over are usually regarded as excellent by lenders. The higher the score, the more significant the benefits you can expect from a more substantial loan amount, a lower interest rate, faster repayment of loans, etc.
How to Create an Excellent Personal Credit Score
- How to calculate a personal credit score Credit bureaus determine a credit score after looking at a myriad of factors such as the length of the credit record, pending debt and credit mix, payment history, and so on.
- Paying your dues in time: Your credit score could improve by ensuring you pay all outstanding debts on time. This includes paying charges on credit cards or EMIs, all loans, etc.
- A sufficient balance in your account: Ensure you have good credit before the day of the payment date. This will ensure that EMIs are paid on time, and you don’t miss the deadline. This can help build your credit score.
- Ratio of credit utilization: Try to keep the balance below 30 percent. Making timely payments and not requesting more loans will ensure the credit utilization ratio is within the limits.
- New loan requests: Many further loan inquiries can lower your credit score. Make sure to limit your questions so that they don’t affect your credit score.
- Credit mixA balanced combination of secured and unsecured loans will ensure an appropriate mix of debt. The suitable variety of obligations shows the borrower can handle every kind of credit.
Business Credit Score
A business’s credit score is between 300 and 900. Lenders often use it as an indicator of the creditworthiness of a company. The credit agencies calculate the score after studying different aspects of your credit file. A higher score on the credit report is a reliable indicator of the company’s credibility. Most lenders want scores at least 750 to accept the loan swiftly.
How to Create a Strong Business Credit Score
- Determining a business’s credit score – A business’s credit score is derived by considering various factors like the number of years in business and lines of credit, payment history, credit history, etc.
- The size of the business The lenders prefer to look at the credit score of personal owners and the business credit score in a small company. This is done to ensure that the owner has a good reputation.
- Experience in business: The longer you’ve worked in the industry, the greater your chances of getting good credit scores. Ensuring you pay your bills on time is an effective method of building a solid credit score.
- Assets of the companyThe company assets can aid in getting secured loans, too. A mixture of secure and unsecured loans works well for your credit score. They also have the assurance of security when a business can pledge company assets.
- The behavior of credit- Making sure you pay your bills and EMIs on time can help you establish a strong credit score. Monitoring your credit report for business regularly will ensure that you stay informed about your credit history and its impact on your credit score and report.
What is the time when lenders look at both business and personal ratings for credit?
The lenders look at the credit and financial history when reviewing the loan application. They scrutinize their credit reports and scores to assess the creditworthiness of the person or company. If it’s business loans, lenders look at the individual’s credit score if they are granting a loan to a small company.
Conclusion
The primary distinction between a personal and a business credit score is that the individual credit score can be intended for people. In contrast, a business credit score is designed for businesses. It is recommended to make payments promptly, keep the lowest credit utilization ratio mai, maintain a healthy credit score, and not make too many loan applications to possess an excellent individual and company credit rating.
